Preamble

The House met at half-past Nine o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Manufacturing (Productivity)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Nicholas Baker.]

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Patrick McLoughlin): This is the first debate in which I have taken part since my move to the Department of Trade and Industry two weeks ago. I am delighted to be back in the Department where I first served as PPS to Lord Young of Graffham when he was Secretary of State. Since then, there have been a number of changes at the Department—it now has responsibility for energy matters and the coal industry. I was involved in the coal industry before I came to the House; I worked for British Coal from 1979 to 1986.
When I first entered the House, I was a consultant to C. M. Spectrum and A. S. L. Alliance, engaged mainly on helping with their work for the coal board. I look forward to seeing some of the developments that have occurred in the Department since I was last there.
This debate is about productivity and performance in manufacturing industry. It is worth spending a little while outlining the situation that we inherited in 1979. The technical definition of productivity is how much output is produced from a unit of input. That is a fundamental measure of economic performance. It is one of the main determinants of our competitiveness and, thus, ultimately of our standard of living.
Manufacturing productivity is especially important because of the role played by manufacturing in our balance of payments. About two thirds of our exports are of manufactured goods. High productivity keeps our costs down and enables us to compete in key areas such as quality and reliability.
It is vital that we match, or better, the productivity performance of our major competitors if we are to continue to perform well in overseas markets. Our productivity performance was transformed during the 1980s. During the 1970s, it was very poor. Between 1973 and 1979, manufacturing productivity grew by just over 1 per cent. a year in the United Kingdom. That was less than all our major competitors achieved. We fell further behind their levels of productivity. For instance, with France the gap increased from less than 20 per cent. to almost 40 per cent., and with Germany it increased from less than 45 per cent. to 70 per cent.
It is not hard to see why we performed so badly. Inflation averaged 15·5 per cent. between March 1974 and April 1979, and peaked at over 25 per cent. in 1975. It remained high and variable for much of the 1970s, creating a climate in which it was impossible to invest or plan with confidence. Public spending was an increasing burden on the wealth-creating sector of the economy. Marginal tax

rates were so high that many people were discouraged from extra effort. There were—believe it or not—nine higher rates of income tax, ranging from 40 to 83 per cent.; and if the investment income surcharge was included, the highest marginal rate was no less than 98 per cent. Corporate taxes were also a heavy burden on small businesses and industrial relations were extremely poor. We lost 29 million working days through strikes in 1979 and strikes became known as the British disease. Trade unions tried to usurp the role of management rather than working co-operatively to improve the lot of their members. They delayed the introduction of new technology and modern working practices.
The nationalised industries suffered particularly badly and often experienced falls, not increases, in productivity. That was hardly surprising, given the level of subsidy that they received. In 1978–79 alone, subsidies totalled £2·2 billion at today's prices. That sustained overstaffing and featherbedding and contributed to poor productivity. In addition, industrial policy was directed at helping old industries survive rather than encouraging new products and new technologies.
Perhaps I have said enough about what we inherited in 1979. It was not a happy picture, but, if we believe the Labour party, everything was fine, there were no problems and the sole concern of the Labour Government was manufacturing which, apparently, they did so much to help. What I have said shows how little they did and how little they cared.

Mr. Tam Dalyell: I was a Member during those years. The Minister has given an incomplete and distorted picture. He spoke about lost working days. At least in those years 3 million people were not unemployed and in some of them there was full employment. Matters should be put into context because the Minister's description is glib and superficial.

Mr. McLoughlin: I can understand why the hon. Gentleman tries to justify the position in 1979 and the strikes. He speaks about high employment, but between 1974 and 1979 unemployment doubled under the Labour Government. While the rest of the world was becoming more competitive, Britain was slipping and that did nothing to sustain employment or present employment opportunities. I am surprised at the hon. Gentleman, because he is occasionally more open and honest about some of the changes that need to be made in manufacturing.

Mr. Charles Hendry: Can my hon. Friend confirm that in 1974 when Labour came to power there was a three-day working week and that five years later, when Britain was back to a five-day working week, it was producing less than it had been producing in a three-day week?

Mr. McLoughlin: I agree with my hon. Friend. I am surprised that somebody as distinguished as the hon. Member for Linlithgow (Mr. Dalyell) should try to persuade us that what happened in the 1970s was good for United Kingdom manufacturing and business; it was not.

Mr. Bernard Jenkin: Does my hon. Friend agree that the rise in unemployment during the 1980s and more recently is not due to a fall in employment opportunities? On the contrary, there has been a steady increase in rates of employment. There are structural and


demographic reasons for the increase in unemployment and it is staggering that we have contained unemployment to the extent that we have. We have a better record than most of our European competitors.

Mr. McLoughlin: My hon. Friend is right. The United Kingdom has one of the highest levels of female employment in the Community. Our record is bettered only by Denmark.
Perhaps we have spent enough time on that. We have heard from one Opposition apologist about the position prior to 1979 and we should now examine some of the dramatic changes that have taken place since the 1970s. I shall contrast the poor productivity in the 1970s with that in the 1980s.
Between 1979 and 1989, productivity grew by more than 4 per cent. a year. That was a better performance than that of all our major competitors and we moved from the bottom of the league table of productivity growth to the top. That dramatically improved performance reflects the success of the policies that we have pursued over the years. We stopped supporting lame ducks and trying, unsuccessfully, to pick winners. Instead, we created an economic framework within which businesses could plan and invest with confidence. We brought inflation under control and today it is at its lowest for nearly 30 years.
We have undertaken major supply-side reforms in the labour market and in taxation. We have privatised 46 major businesses, and every one of those privatisations was opposed by the Labour party. These reforms have enabled firms to prosper in the low-inflation environment that we have created and have allowed us to attract substantial investment.
It was clear in 1979 that the trade unions were a major cause of Britain's being at the bottom of the growth and productivity leagues. The ability of managers to use resources as they saw fit had to be regained if they were even to begin to catch up. Our trade union legislation has restored the right of managers to manage. It has made trade unions more accountable to their members by requiring the direct election of union leaders and the balloting of members before industrial action. The closed shop was made unlawful and the scope for demarcation disputes was reduced. Those reforms were fundamental in helping us to improve productivity in the 1980s, but every one of them was opposed by the Labour party.

Mr. Mark Robinson: Does my hon. Friend agree that that is exactly why it was so important to secure the opt-out from the social chapter?

Mr. McLoughlin: My hon. Friend is wholly right. [Laughter.] The hon. Member for Tooting (Mr. Cox) laughs. He is the only Opposition Back-Bench Member present for this important debate. My hon. Friend is right about the opt-out and I shall later examine some of the implications of that and the importance of competitiveness. It is important that my right hon. Friend the Prime Minister was successful in not signing Britain up to the social chapter.
Other reforms have improved the working of the labour market. We have encouraged direct employee involvement in the success of companies through tax relief for profit-related pay and employee share schemes. Our tax reforms have also helped productivity. We have given

individuals incentives to greater effort because the nine higher rates of income tax have been replaced by a single higher rate of 40 per cent. We have reduced the basic rate to 25 per cent. and have introduced a 20 per cent. band.
Our marginal tax rates are among the lowest in the advanced world, making Britain an attractive place for the brightest and best to work. We have cut corporation tax from 52 to 33 per cent. and our corporation tax is now the lowest in the EC or the Group of Seven. The taxation of companies is much simpler and it is without many of the distortions that we inherited in 1979. Companies now invest according to their commercial judgment, not in the pursuit of tax breaks. As a result, the quality of investment has improved, boosting productivity.

Mr. Jim Cousins: How does the Minister respond to the approaches being made to the Government by the CBI and the Engineering Employers Federation? They want the Government to put back some of those tax breaks, especially for certain kinds of investment. They say that although corporation tax is low, the take is extremely high.

Mr. McLoughlin: Those matters are being put to my right hon. and learned Friend the Chancellor of the Exchequer, who will no doubt consider them before making his announcement on the Budget. The hon. Gentleman would not expect me to comment on those matters.
Since 1979, privatisation has been a cornerstone of our policy. In that time, it has radically changed the United Kingdom's economic and industrial structure. I have already described the poor performance of the nationalised industries in the 1970s. Giving these companies commercial objectives and exposing them to market discipline was essential if their performance was to improve. Requiring them to compete for investment funds on the capital markets, rather than obtain them from the taxpayer, was vital.
We gave managers clear incentives to improve performance—and it was not just for managers that incentives changed. More than 90 per cent. of eligible employees became shareholders in the privatised firms in which they worked. That gave them a direct interest in improving productivity and performance as well.
The result has been some dramatic improvements—in British Steel, for example. In 1979–80, it took more than 13 man hours to produce one tonne of liquid steel. Now, it takes less than five man hours. It is that sort. of productivity improvement that has made British Steel the EC's most efficient integrated steel producer and one of the most efficient in the world. British Gas has increased the number of customers per employee by about 19 per cent. and gas sales per employee by about 21 per cent.

Mr. Cousins: Will the Minister give way?

Mr. McLoughlin: I shall give way once more, but, as a number of my hon. Friends wish to take part in the debate, I must make progress.

Mr. Cousins: Can the Minister explain why defence manufacturers are concerned that they cannot buy armour-plated steel in Britain but have to import it from Sweden? Can he explain why some people in the car industry are extremely concerned about their inability to buy stainless steel in Britain? If it is such a wonderful story, why are those people so concerned?

Mr. McLoughlin: Once again, the Opposition spokesman is trying to justify everything that happened in 1979. He will not accept that there have been real structural changes in the steel industry. He would like to take us back to 1979, when there was a nationalised steel industry which was not competing and was unsuccessful. I well remember that time, when certain companies were closing and their car parks were full of foreign cars—yet people were complaining that British Steel was not selling its products to British companies.

Mr. Jenkin: Does my hon. Friend think that the fact that German industry sometimes has to import British steel sends it into despair?

Mr. McLoughlin: Certainly not. I shall say more about international comparisons shortly.
The supply-side reforms of the 1980s made the United Kingdom an attractive, low-cost EC country for investment by successful overseas companies. In 1991, the United Kingdom accounted for 36 per cent. of the stock of United States investment and 40 per cent. of Japanese investment in the EC. Toyota and Nissan have undertaken in the United Kingdom two of the biggest inward investment projects in Europe. Between them, they will eventually create more than 7,000 jobs.
Since 1986, an estimated 146,000 new jobs have been created in the United Kingdom from inward investment. There are many reasons why firms have chosen to invest in the United Kingdom. Toyota, for example, quoted our strong traditions both in the motor industry and in the skilled work force as reasons why it chose to invest here.
Inward investment has helped to reinvigorate key sectors such as vehicles, office equipment and chemicals. It has boosted productivity by bringing the latest technology and the best international management practice to the United Kingdom.
Research by the German chamber of commerce shows that more than two thirds of German-owned manufacturing concerns operating in the United Kingdom achieve productivity levels at least as high as comparable units in Germany. Kodak reports that productivity at the Kirkby. plant, which produces its main synthetic chemical, is the highest among its worldwide operations.
Productivity in the car industry increased by 82 per cent. between 1981 and 1992, well above the average for manufacturing industry. The vehicles industry is producing 300,000 more vehicles a year than it was 10 years ago, with 100,000 fewer people. In 1992, the United Kingdom produced more than 500,000 vehicles for export and by 1995 we expect to be a net exporter of cars—a position which could not have come about without significant productivity improvments and the fact that the United Kingdom attracted that inward investment when it could have gone to any part of the European Community. When businesses look for the best place to invest, they know where it is; it is just a shame that the Opposition do not.
The benefits of inward investment to the car industry can be seen by the fact that Nissan UK is aiming to achieve by 1996 productivity levels at its Sunderland plant equal to those in Japan. Inward investment has also made the United Kingdom a net exporter of colour television sets and a major European producer of personal computers.
The continuing benefits of our supply-side reforms can he seen in the recent behaviour of manufacturing productivity, which, in the first quarter of this year, was

almost 8 per cent. higher than a year earlier. That is the highest growth rate for more than six years. In earlier recessions, in the mid and late 1970s, productivity growth was much lower and often negative.
The much-improved growth performance since 1979 has resulted in a substantial narrowing of the gap between the United Kingdom and our main competitors. The true extent of the gap that remains cannot be determined with certainty. In measuring productivity, allowance has to be made for the different quality of goods produced, for the number of part-time workers and for the number of hours worked. Moreover, the availability and quality of data vary from country to country.
Nevertheless, studies have universally recorded a reduction in the productivity gap. Recent estimates suggest that, between 1979 and 1989, the manufacturing productivity gap with Germany fell from 70 to 30 per cent; that with France fell from almost 40 per cent. to about 25 per cent; our gap with the United States fell by 20 percentage points to about 65 per cent. Those figures, although encouraging, show that we still have some catching up to do. At the same time, we must be careful not to read too much into averages—there are sectors in the United Kingdom economy that have productivity levels among the highest in the world. For example, we exceed German productivity levels in metal manufacture, chemicals and electrical engineering, and French productivity levels in electrical engineering, printing and publishing.
Pharmaceuticals is an industry where the United Kingdom ranks among the best in the world. The United Kingdom pharmaceutical industry boasts four world-class companies—Glaxo, SmithKline Beecham, Wellcome and Zeneca. The first two are in the top 10 internationally. Output per employee in the pharmaceutical industry has risen steadily for a generation.
The United Kingdom aerospace industry is equal with France as the second largest in the western world in turnover. It contributed about £2·5 billion to the balance of trade in 1992. Even in those sectors where we are some way behind, there are still some world-class United Kingdom companies. However, there is no room for complacency. That is why our policies will continue to focus on areas vital to sustaining productivity growth.

Mr. Dalyell: For the sake of the Minister's officials, I give notice of a question that I hope to put to the Minister later. What is the position on the moneys that have been frozen for Glaxo exports to Iraq of urgently needed pharmacological products? I understand that the managing director of Glaxo, Dr. Richard Sykes, is considering the problem. What is the Government's position on, first, the export of Glaxo pharmacological products to Iraq and, secondly, the particular problem of those pharmacological products for which the Iraqis say they have already paid? Those are urgently needed medicines and insulin which, apparently, are being held back. I do not expect the Minister to answer now, but I hope that his officials will investigate the matter.

Mr. McLoughlin: I am grateful to the hon. Gentleman for giving notice of his questions. I hope to answer them later.
Perhaps the most important of the vital areas to which I referred is education and training. A recent study by the National Institute of Economic and Social Research


estimated that more than half the gap in productivity levels between United Kingdom and German manufacturing was accounted for by differences in labour force skills. It is clear that a skilled and flexible work force is vital if we are to sustain productivity growth and catch up with our main competitors.
I have said quite a lot about what we have done through the supply side, such as creating a flexible labour market through our trade union reforms. The Government have done much to transform education and training and to make those relevant to the needs of industry. Our education reforms will improve the quality of young people entering the labour force. The national curriculum, with its greater emphasis on work-related subjects, will play an important part in that. Design and technology, for example, will, for the first time, be studied by all pupils up to the age of 16.
An integral part of our education reforms is testing in schools. Testing is a fact of life, and our firms are tested every day in the world marketplace. Testing in schools is therefore an essential ingredient in preparing our children for the future. Many of our efforts on training have been channelled through training and enterprise councils, which were established three years ago with the objective, among others, of improving the quality and relevance of training. TECs are responsible for delivering a wide range of training services, including the investors in people programme.
That programme aims at encouraging employers of all sizes to improve their business performance by linking the training and development of employees to business objectives. The standards set by it are national, but are delivered locally by TECs, the boards of which are dominated by local, private-sector executives. Local employers know best what training is required and the ultimate responsibility lies with them.
I am greatly encouraged by statistics published earlier this week by the Policy Studies Institute showing that in the past five years nearly two thirds of workers have increased the level of skill that they use in their jobs. We still have a long way to go, but we are making progress.
Innovation—the successful exploitation of new ideas —is a key factor in productivity growth. The recent science and technology White Paper contains proposals that will improve the focus of public spending in that area.
Many more companies will be able to gain access to science and technology and innovation best practice. In particular, small firms will have better access to science and technology. Small firms are a vital source of innovation and productivity improvements.
The Government support small firms with a variety of measures. Innovation is encouraged through the Smart and Spur programmes, which assist such firms in the development of new products and processes involving significant technical advance.
The shift in emphasis towards giving greater help to small firms in science and technology underlines our commitment to that sector. I am confident that it will bring with it an increase in competitiveness and associated gains in productivity.
In 1985, my Department launched the deregulation initiative. That on-going exercise is designed to eliminate

the burden of unnecessary regulation on firms—a burden which imposes costs that reduce productivity and damage competitiveness.
My right hon. Friend the Prime Minister recently gave fresh impetus to that assault on red tape. As a result, we are systematically reviewing all existing regulations and other forms of red tape that the Government impose on business. Wherever possible, we will remove or simplify regulations and procedures so as to minimise the costs to small firms—and no further regulation will be imposed on business without the costs having being spelt out in Parliament first.
There has been a substantial improvement in our manufacturing productivity performance since 1979. In the short term, of course higher productivity often means fewer jobs—but in the long term, increased productivity boosts investment and growth and creates a substantial number of sustainable jobs.
We have a higher proportion of the adult population in work than any other EC country except Denmark and Luxembourg—a point made by my hon. Friend the Member for Colchester, North (Mr. Jenkin)—and the gains that were made will be shown to be real and long lasting as we we emerge from recession.
The policies currently pursued by this Government will build on those improvements. Paramount among them are the constant efforts that we are making to keep inflation low. At 1·3 per cent. in April, retail prices index headline inflation was the lowest for nearly 30 years, and underlying inflation is the lowest for 25 years. We have set clear targets for inflation.
Our success in the fight against inflation has allowed interest rates to come down to their lowest level for 15 years. Low inflation, low interest rates and rising productivity are essential ingredients of industrial success. Productivity is sharply up, and in the first quarter of this year manufacturing unit wage costs were 2·9 per cent. below their level a year earlier—the best performance since records began in 1970. Provided that we stop talking of the decline of manufacturing and appreciate more the excellent manufacturing sectors and firms that we have, we can build on the progress that we have already made. And we can look forward, with confidence, to continued growth in manufacturing productivity during the rest of the 1990s and beyond.

Mr. Jim Cousins: The Minister read us largely a history lesson. I am not sure how good it was, but it is not history lessons that we need now. After a week for the party of government full of such sturm and drang, I suppose that the Government might turn to history for a little comfort.
The Minister's case amounts to saying that during the 1980s, Conservative Governments applied to British industry some of the most volatile swings in policy change, interest rates and so on, ever imposed by any Government. There are some survivors and the Government seek to take credit for that. The technique is the same as electro-convulsive therapy. Those who do well out of it bring to the therapy a native robustness and good health that is capable of enduring the experience. The Government cannot take much credit for the survivors of that dreadful experience of the 1980s, with all its wild swings of economic intentions and performance.
The most worrying aspect of even the positive elements of the 1980s is the other side to them. It is true that the 1980s saw a considerable increase in manufacturing productivity and I will refer later to the reason why that might have happened. The Minister rightly identified two key sectors—aerospace and the chemical pharmaceutical industries—which, if we can get it right, will be the main motors of British economic success in years to come. Their present record of productivity and production is extraordinarily powerful and important and provides a model for the rest of the economy.
The Government's difficulty is that while there have been productivity gains in manufacturing, it is equally true that productivity across the whole economy has not improved to anything like the same degree. If the service sector—distribution, retailing, banking, insurance and financial services—in which employment grew throughout the 1980s is to be put to the storms through which manufacturing industry went in the early and-1980s, the consequences for employment, particularly in the southern part of the country, are likely to be devastating.
The hon. Member for Colchester, North (Mr. Jenkin) made a significant remark. The Minister was having difficulty at the time explaining manufacturing productivity and its connection with employment. If one increases production 5 per cent. and gets rid of 2·5 million or 2·75 million jobs in the process, no one can take credit for that —but if one increases production and maintains employment, that is a triumph. That is not the Government's record. Their record is of increasing manufacturing production by 5 per cent. and of disposing of 2·5 million to 2·75 million workers.
Conservative Members should think carefully before quoting that as a great success. The consequences of that policy are to be found on every street corner in every town and city in the country. They are to be found in the reduction in the feeling of belonging to society which is suffered by so many. As a Member of Parliament representing a Tyneside constituency, I have seen for myself and in the media men leaving Swan Hunter shipyard, which is currently in great difficulty. Many jobs there have already been lost and now the jobs of the skilled men who walk up the bank from that shipyard—men with meaningful skills such as electricians, fitters and other high-productivity workers—have been laid low by that company's financial position and lack of Government orders. Those men aged 40 with young families and mortgages are saying openly and publicly that they never expect to have a proper job again. Many of them are looking for contract jobs at the other end of the country or abroad. If they get such jobs, they will never see their young families or participate in growing up with them. That is the economic fate that those men see for themselves. I doubt whether anything that is said by Conservative Members this morning will change the harsh realities of their situation.
That is the reality of some of the productivity gains. It is the sort of thing that we mean when we talk about structural and demographic trends. It is the reality of city life and town life when we dismiss so many skills and so much experience and commitment and say that it is a structural and demographic change. It is an unfortunate approach to take.

Mr. McLoughlin: No one underestimates the seriousness of people being made unemployed and the

devastation that it can have on individuals and their families. The hon. Gentleman should tell us whether he believes that keeping productivity levels low and, therefore, keeping people in employment would necessarily lead to a growth in exports and selling our goods abroad when they become more expensive than those of other countries. We must compete. It is no good trying to get away from the fact that we will not be able to do that without increased productivity.

Mr. Cousins: Clearly, I have not said that. Unfortunately, the sector industries in which the productivity gains have been the highest are the most exposed to economic difficulty at present. That is precisely the problem.
We should take a brief excursion into history to look at the sort of community that existed in the 1930s. I do not represent such a community—my constituency is described in all the handbooks as middle class residential and I do not argue with that. A better comparison would be to consider the shipbuilding areas on Tyneside down the river. With the level of unemployment that existed in the 1930s, men were at the shipyard gates every morning seeking work. Throughout the depth of the 1930s recession, people never stopped being in their own minds riveters, welders, fitters, boilermakers, platers or platers' helpers. The reality of the economic situation brought about by the Government today is that once a man in those industries loses his job, he throws away his identity and has no credibility that he will ever work at his trade or skill again.

Mr. Julian Brazier: I have listened carefully to what the hon. Gentleman says and I understand his point. But I shall put two points to him. First, if we are looking at a comparison with the 1930s, the level of unemployment in what was a much smaller work force was 25 per cent., so to compare it to today's level is a false analogy.
Secondly, the hon. Gentleman is absolutely accurate —this is not the Government's fault. It is not the fault of the Governments of Spain, France, America or any other country in the developed world. The hon. Gentleman is talking about a phenomenon that always occurs—a loss of identity of this sort—when there is a great revolution in productivity, whether it is the agricultural revolution, the industrial revolution or the technological revolution. When there are great changes, people lose their working indentities. It is a challenge for every country in the industrialised world.

Mr. Cousins: The hon. Gentleman is right, but what he has not come to terms with is that all Governments in the European Community, whether Christian Democrat or Social Democrat, accept a measure of responsibility for that. Perhaps Christian Democrat parties and Governments provide a good model for Conservative Members. If we had a Christian Democrat Government, rather than a Conservative Government, matters would be different because we would not then have the wiping of the hands of responsibility for those matters that we see in the present Government. A Christian Democrat Government would not wipe away their responsibility for the problems to which I have drawn attention. We see Christian Democrat Governments standing behind people in their time of difficulty, accepting a great measure of social responsibility and devising welfare systems that are


precisely targeted at enabling a long and painful but necessary transition from one sort of employment to another. Christian Democrat Governments across the European Community are asking employers to accept obligations to be actively involved. Was not that the purpose of the whole debate about the social charter and the social chapter?

Mr. Brazier: To suggest that somehow or other all over the continent they are doing something that we are not is manifestly nonsense. To give one example, the United Kingdom is the only country in the EC that guarantees all school leavers a training place if they do not have a job. If one looks at the whole EC, our level of youth unemployment among the age group immediately above is lower than that of most of our economic partners for that reason.

Mr. Cousins: If the hon. Gentleman looked at the training policies pursued by Christian Democrat parties and Governments in the Netherlands and Germany, he would be ashamed to say what he just said, because the attitude of those parties and Governments is completely different. They do not regard training as a residual after all the economic forces have been at work—one finally offers, inadequately in many cases, a residual commitment to find a training place in some sort of scheme. That is not the case. Those parties and Governments want their young people to be full members of their economies and participate in significant training that is immediately locked into the patterns of occupations and the pattern of employment. That is an entirely different policy from the one followed by the Conservative party and the Conservative Government.

Mr. Jenkin: I am listening carefully to the hon. Gentleman's comparison between our employment and industrial policies, especially our training policy, and those on the continent. The House would be most interested to hear about the measures, spending and activities in which he thinks the Government should be engaging. What proposals does he envisage which we are not carrying out at present? His general comments have left us in the dark.

Mr. Cousins: It is a pity that the hon. Gentleman did not ask the Minister that question when he was reading his historical lesson. I accept the point of correction. We shall come back to the narrow task and examine it.
I have made the point that we must be worried about the comparison between whole economy productivity and manufacturing productivity. There are some dangerous signs there, because, if productivity improvements are to be made in the service sector by the same mechanisms as have delivered productivity improvements in manufacturing industries, there may be some remarkable reductions of employment in precisely those sectors of the economy in which employment has grown recently.
In response to a point made earlier by the hon. Member for Canterbury (Mr. Brazier), perhaps the most worrying thing about the present recession is that 2 million jobs have been lost, but only 1·3 million people have been added to the unemployment register—700,000 people have apparently, for these purposes, disappeared. What is the explanation? There are some extremely worrying facts. Many people are still part of the economic life of the

country but do not register as unemployed because they believe that there is no point in doing so: there are no jobs on offer or, more significantly, the sort of employment that they had did not provide a continuing basis of national insurance contributions to trigger the right to unemployment benefit.
It must be a source of anxiety to us all that so many people are employed on the basis of either low wages or casual or temporary employment which does not allow them to obtain unemployment benefit when they lose their jobs. Their contribution records do not entitle them to claim unemployment benefit. The existence of such a large number of people who are on low wages, mostly in the service sector, but in certain manufacturing sectors as well, should be a source of grave anxiety to us all.
We are all aware of the unemployment problem, but there is now a massive problem of sub-employment—people who work in a twilight sector of the economy that does not enable them to build up sufficient credits, through the national insurance system, to enable them to obtain unemployment benefit when they lose that source of employment. When there are shake-outs in manufacturing industry, people with young families find that regular employment, which they are entitled to expect, is no longer available to them and that they have to seek casual, temporary work—often a long way from their homes—if they are to have any sort of income. When the industries in which they are then employed also fall on hard times, they find that they cannot register for unemployment benefit.
Productivity gains have been achieved by the loss of jobs. They have not been achieved by improving the human or physical capital of industry. I exclude the two sectors to which I have already referred: chemicals and pharmaceuticals and the aerospace industry. There have been significant productivity gains in the chemicals, pharmaceuticals and aerospace industries, on the basis of larger human or physical capital inputs and rising production.

Mr. Jenkin: Does the hon. Gentleman seriously propose that there has been no increase whatsoever in the skills base in the motor manufacturing industry, for example, in steelmaking and in a whole range of other industries? The hon. Gentleman's proposal is absolutely preposterous.

Mr. Cousins: Most of the productivity gains in almost every sector of industry can be accounted for by loss of employment, not by other changes. I did not say that there had been no increase in skills, but loss of employment has made the largest contribution to productivity gains. In a limited number of industrial sectors, more has been contributed by larger capital inputs and rising production than by loss of employment. The chemical and pharmaceutical industries stand alone in that respect.

Mr. McLoughlin: The hon. Gentleman's point is fairly weak. Is he suggesting that we should keep employment up and productivity levels down? He states that there has been no growth in employment. How, therefore, does he account for the fact that Toyota and Nissan have made major investments in this country and have created jobs for people here, with the result that, by 1995, we shall be a net exporter of cars? Is the hon. Gentleman telling us that, somehow, that is a bad thing?

Mr. Cousins: Let me put the point to the Minister in another way. The innovation unit of the Department of Employment issued this week what is called a company reporting scoreboard on research and development expenditure. The foreword to it was written by the President of the Board of Trade. He takes pride in the fact that the reported spend, according to company reports throughout the industrial sector—every large British company is to be found in this report—increased by 6 per cent. However, the President of the Board of Trade then said:
We cannot however be complacent. Internationally the figures reported by the top 200 companies have risen by 8 per cent. and the UK's top spender is only 47th in that league. It is also sobering to see that the top international companies spend some 4·6 per cent. of their sales figures on research and development where UK companies spend 1·6 per cent. These figures can only underline my statement about the need to increase the effectiveness of the UK's research effort.
He also talked about
developing an innovative culture where new ideas are readily exploited".
That may be a matter of contention for the hon. Member for Colchester, North, but it is not a matter of contention for the President of the Board of Trade. He recognises the point that I make. He recognises that productivity gains have not been achieved on the basis of success of the kind with which the Minister seeks to deceive us this morning. According to the President of the Board of Trade, on the basis of his Department's own figures, the United Kingdom's top spender is 47th in the international league of the 200 top companies. That is the real record of this Government which they must try to defend.
One of the great problems with British industry is the lack of training and management at middle level. Technicians and supervisors are often called on to perform on the basis of inadequate preparation. That fact is well attested. The Minister is able to point to the example of Toyota and Nissan only because their great contribution to British industry is that they have not made that mistake. Nissan is a company which, as one would expect of a Member of Parliament with a constituency in the north-east of England, I know well. Toyota and Nissan perceive that industry succeeds on the basis of supervision, technicians and middle management. It is as a result of the team work for which those men and women are responsible that productivity is increased.
The remarkable increase in productivity in manufacturing industry in my region has been brought about substantially by those companies and by the spread of the culture and insights that they brought with them to other related companies. That is what we should seek to do right across industry. There is an enormous amount to be achieved by backing up technicians and supervision and by building up workplace practices on the basis of teamwork. That is the secret of the success of Toyota and Nissan and of the success of the aerospace and pharmaceutical and chemical industries, which already had in place precisely those management techniques.

Mr. David Madel: I am sure that the hon. Gentleman recognises that the change in work practices introduced by Toyota and Nissan into the car industry are applied now by Vauxhall.

Mr. Cousins: Indeed. Those practices are certainly not now confined to a handful of Japanese companies. That illustrates what can be achieved across the whole spectrum

of British industry. Those practices also illustrate how much further there is to go and how much more can be achieved in terms of increasing productivity, not simply by sacking people and reducing employment, but by changing workplace practices on the basis of teamwork and commitment, which results in success.

Mr. Hendry: Is the hon. Gentleman aware that those changes were brought about as a result of this Government's policy, in the teeth of opposition from the Labour party and its union paymasters, who have backed every single Spanish practice and every outdated demarcation dispute and who have been the greatest factor in the resistance to change? One of the most important factors in these changes has been the breaking of that stranglehold upon British industry.

Mr. Cousins: It is simply fanciful for Conservative Members to give the Government the sole credit for successful inward investment. That is entirely mistaken.

Mr. McLoughlin: If that is so, can the hon. Gentleman explain why that inward investment was made in Britain?

Mr. Cousins: I played some part myself—

Mr. Jenkin: The hon. Gentleman was responsible!

Mr. Cousins: No. My part in the process enabled me to see why Nissan chose to locate its plant in the north-east of England. A variety of factors is always involved in such decisions, one of the most important of which was that Nissan and Toyota looked at parts of Britain where they knew that well-organised, highly motivated, skilled and productive workers had been made redundant in large numbers.

Mr. Mark Robinson: The hon. Gentleman is beginning to give the impression that only two companies have sought to make inward investment in Britain. The example of south Wales shows that a vast number of companies —not just Japanese—have chosen to locate in Britain. He will recognise that Britain has been more successful than any of its European partners in attracting inward investment.

Mr. Cousins: I am in a measure of agreement with the hon. Gentleman. One of the most successful examples of inward investment in my area is Komatsu. What did it do? It took over the work force and trade unions of a tractor plant that had been closed, but, because it had the right approach to getting the best from people in the community and from the work force and because it respected the skills and experience of the work force, it was able to achieve things of which, I am afraid, British management, with their older tradition, was not capable.
Conservative Members denounce trade union practices and refer to Spanish practices, but they should recognise the role that simple bad management played in bringing down some major British industries.

Mr. Mark Robinson: The hon. Gentleman is speaking in a derogatory manner about British industry. British Steel in Llanwern, which I know extremely well, has gone through a revolution in terms of its industrial practices and that needs to be recognised. The examples of inward investors that the hon. Gentleman gave have been widely copied throughout British industry and I think that British Steel was ahead of the pack.

Mr. Cousins: Indeed. I have already said that there are sectors of British industry, and they are among the most successful, where those practices are already in place. The chemical, pharmaceutical and aerospace industries already operated such methods.

Mr. Gary Streeter: I congratulate the hon. Gentleman on being able to read John Edmonds' handwriting so well. Would those foreign companies have invested in Britain if the Conservative Government had not reformed the trade union practices of the 1970s—yes or no?

Mr. Cousins: Of course they would have come here. My only regret is that the potential that they saw in this country and in its skilled and experienced work force was put on the scrap heap in the first place. Japanese, American and European inward investors saw potential in work forces that had simply been discarded by the Government and by sections of British industry in the terrible, unnecessary storms of the early 1980s.

Mr. Jenkin: rose—

Mr. Mark Robinson: rose—

Mr. Cousins: I am sorry, I must press on.
My central point is that the productivity gains that have been made are a consequence of unemployment. We would have wanted those productivity gains to be achieved as the most successful sectors of British industry have achieved them—as a consequence not of unemployment but of organic growth, innovation and research and development.
Our chemical, pharmaceutical and aerospace industries have achieved precisely that, but one significant fact differentiates those industries from many industries that have performed less successfully. The success of those industries, especially pharmaceuticals and aerospace, rested on the basis of Government procurement. The reliability of Government procurement through the national health service and defence expenditure enabled those industrial successes to be achieved. Those industries, pharmaceuticals and aerospace, have benefited most from direct Government intervention in the form of launch aid under the Industry Act 1975, which this Government continued. The success of the aerospace industry could not have been achieved without that.
Those industries benefited because, in partnership with the education system and especially the higher education system, they were able to develop and exploit enormous quantities of graduate person power. Those industries provide a quite different model and a different set of signals for the role of Government in increasing productivity from the one in which the Government take most pride. They have grown on the basis of organic growth, of production engineering rather than financial engineering and of innovation rather than seeking to exploit asset values and asset stripping. They have grown on the basis of continually bringing new products to the market. They have operated on the basis of high levels of union organisation and of drawing the unionised work forces into the process of industrial consultation and decision making. They have achieved their productivity on the basis of teamwork rather than confrontation.
That is why those industries have succeeded. Those are the models that we should be seeking to adopt when we think about increasing productivity across the rest of our

industrial sectors. Those models are precisely the opposite of the way in which the Government's policies and the thrust of their intentions are going at the present time.

Mr. David Madel: I congratulate my hon. Friend the Under-Secretary on his move back to industry. I am glad that he is wearing his industrial hat again. He has first-hand practical experience of a major industry.
The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) began by referring to the difficulties that the governing party has experienced in the past week. I take his point. We have, in a sense, been here before, because my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) compared himself with Mr. Selwyn Lloyd, the other Chancellor of the Exchequer who was dismissed. I wondered, thinking about history, whether Mr. Selwyn Lamont had been replaced by Mr. Reginald Clarke and whether we shall have a rerun of 1962–63. I remember that, on becoming Chancellor, Mr. Maudling accelerated expansion and Conservative fortunes recovered. I am immensely encouraged by what my right hon. and learned Friend the new Chancellor has said about the need for faster economic growth and to preserve the welfare state—two excellent policy openings from my right hon. and learned Friend the Chancellor, whom every Conservative Member wishes well in his new tasks and opportunities.
What the Chancellor of the Exchequer said about economic growth makes today's debate extremely relevant. I am sure that all hon. Members who speak today will underline the great importance of our manufacturing industry to the country. We must remember that we unfortunately have a smaller manufacturing base than France or Germany. We have a considerable amount of catching up to do to restore ourselves to the position of a major manufacturer in the world economy.
My hon. Friend the Under-Secretary of State rightly referred to the new mood of co-operation in industry which, to a great extent, has been brought about by the changed atmosphere in industrial relations that followed our sensible trade union reforms. In my area, we welcome the transformed atmosphere in the car industry, which is due not only to Japanese investment in the car industry —and we greatly welcome Nissan in Bedfordshire—but to Vauxhall, although it must be said that many jobs have been shed over the years as new industrial methods and a greater emphasis on plant and machinery have been introduced.
I cannot let the debate pass without saying that although the improved atmosphere in the industry as a whole and the improvement at Vauxhall motors is mightily good for Bedfordshire, Dunstable suffers the continuing tragedy of the complete loss of truck production with the demise of AWD (Bedford) and the loss of truck manufacturing at Renault. The Minister knows that Bedfordshire will continue to press his Department for all possible help so that we can restructure the manufacturing base in my part of Bedfordshire, which has played a substantial role in exports and industrial success since the war.

Mr. Dalyell: The hon. Gentleman mentioned "all possible help". I know that he will recollect that he secured an extremely pertinent Adjournment debate on exports to


Libya from his constituency. Does he think that it is important that the Government should consider—I shall not press him for any commitment beyond that—re-examining sanctions against the valuable Libyan market? Sanctions against Libya have been extremely damaging to British industry. Does he believe that that is a matter for reconsideration?

Mr. Madel: I do, and I am grateful to the hon. Gentleman for reminding me of that debate and of the contributions that we both made in European Standing Committee B on that issue. He is right to draw attention to the fact that, in 1992, there was a possibility of Bedford Trucks getting a substantial order for non-military, civilian trucks for Libya. For various reasons, the order did not go through, and we still do not know the full story behind that. However, there are opportunities for exports other than non-military trucks to Libya, and I do believe that the issue should be reconsidered. Where better to re-examine it than at the Copenhagen summit later this month, where the Heads of State will consider trade as they grapple with Europe's unemployment difficulties?
I greatly welcome my right hon. Friend the President of the Board of Trade's sense of purpose and energy. In an article in the Financial Times on 26 April 1993, under the sub-heading "Where the main thrust of the DTI's new competitive policy will be focused …" and in the section headed "Sectoral divisions", it is stated:
There will also be plenty of emphasis on so-called benchmarking—continually comparing company and industry performance against best practice and recommending ways of improvement.
That is welcome because it urges greater industrial co-operation, but it also underlines the DTI's philosophy that competition is not about doing down one's neighbour but is something which is thoroughly healthy for the economy and something which should constantly be fostered. I shall spend a few minutes amplifying the idea of improvement contained in the quotation.
Clearly, in any debate on manufacturing productivity, we must say something about the necessity of continuing to improve the education system which is so relevant to our manufacturing performance. I hope that the summer term will mark the end of the wretched discord between the teachers and the Government about testing. The next marker on the education scene will be the GCSE and A-level results in August. When they are published, I hope that there will be no instant comments but a careful analysis of what has happened in comparison with previous years. I hope that Sir Ron Dearing and his new committee will also examine the matter.
Parents obviously want to know whether GCSE standards are continuing to improve, but they will also want to know whether there is uniformity of marking by the various GCSE and A-level boards. They will want assurances that the testing before the GCSE is designed to improve GCSE standards. The Government should take more credit for introducing the new system of public examination, which came about after a great deal of internal debate in the Cabinet and in the then Department of Education and Science. Nothing pleases employers more than to see proof of rising standards in GCSEs. Employers and parents want to know that the tests before the GCSE exams are designed to raise standards. That is what parents will be looking for when the next education marker appears in August.
I outline two additional points on which I should like the Government to act. I want it to be made easier for young people to do the necessary studying on their own. As they move to GCSE and A-level, more work is done by the individual with the necessary supervision from time to time. Greater use should be made of public libraries, parts of which should be set aside for young people to do the necessary study during the day. There should also be greater use of schools outside school hours so that young people can do personal study to improve their GCSE and A-level performances.
We must also constantly examine the student support system and ensure that we are not doing anything to deter young people from entering higher or further education. I am especially worried about the way the discretionary grant system works. Is it as helpful as it could be to young people?
On the question of the education service at the local level, and before Sir John Banham and his team plunge into making big changes to the shire counties and district councils and suggest more unitary authorities, as I think that they might, I ask them to consider whether changing local government will improve the education service in any given area. I was delighted when the President of the Board of Trade, in his former role as Secretary of State for the Environment, said that there would be no uniform change in local government as happened in 1974. In passing, I ask Sir John Banham and his team, who are doing an important job, please to ensure that any local government changes will improve the education system as it is delivered locally.
On more general matters, it is still early days to talk about changes in the financing of roads and motorways. However, we all recognise that industry needs to improve the speed and efficiency with which it gets goods to market. That inevitably means an acceleration of infrastructure improvements. We are still at an early stage with the White Paper on possible road pricing on motorways. We should avoid a flat-rate charge. If industry is to accept the idea, it would far prefer a pay-as-you-go system on certain motorways. Obviously, that means waiting for the new technology necessary to make it practicable. If we have to wait a bit, fine. Let us ensure that the technology is British made.
Whatever happens with road pricing and whatever we do with the railways, we must always remember that the majority of goods transported around the country will continue to go on the roads. That means that we need a better infrastructure system. The way in which we price that and charge for it must be ultra-sensitive to industry's needs and to industry's costs.
We must stay in the world league of manufacturing. We must be right at the top for the sake of employment, for the sake of prosperity and for the sake of social stability. That means that we must have a policy that produces a high level of investment which will provide more plant and machinery. That means taking risks and being patient for the results to show when there has been investment in plant and machinery. That means a sea change in the banking system's attitude to risk-taking in manufacturing industry.
One way in which industry—big, medium and small —can be helped, especially in the regions, is by more non-executive directors on boards of companies coming from the banking system. They would then understand on a day-to-day basis, as a result of their board duties, what


the problems are for manufacturing industry and how, inevitably, it is a slow, patient business to get a company going and for profits to come on stream.

Mr. Tony Banks: The hon. Gentleman said that it was necessary for us to catch up in terms of investment compared with France and Germany. He is now saying that we need to have more investment in capital equipment in manufacturing industry. Is he aware that, according to the latest statistics from the Organisation for Economic Co-operation and Development, we have only half the private capital sector levels of Germany and only three quarters those of France? It is no good. If we are to increase productivity and employment—I think that the hon. Gentleman sees this argument—we need greater investment in industry.

Mr. Madel: Yes, I agree; we need greater investment and I am developing that point. To achieve that, one must have a closer relationship between the banking system and the manufacturing system. I made the point about getting more people from banks on the boards of companies so that they would understand what a slow process achieving the results of investment can be.
The hon. Member for Newham, North-West (Mr. Banks) may make this next point if he catches your eye, Madam Deputy Speaker. There is a need for a big commitment to research and development. I welcomed the White Paper on science and technology which my right hon. Friend the Chancellor of the Duchy of Lancaster announced recently. One point in his statement to the House especially caught my attention. He said that he had decided to establish a new council for science and technology, which he would chair on behalf of the Prime Minister, to provide the Government with
independent expert advice at the highest level on research spending priorities."—[Official Report, 26 May 1993; Vol. 225, c. 924.]
That is a welcome underlining of the Government's role in research spending priorities. I am sure that we shall all draw attention in the debate not only to the Government's role in research, but to the Government's role, as has been mentioned, as a purchaser of manufactured goods and to what the Government can do to help manufacturing industry by buying British and thinking in the long term.
There is also an obvious need for a patient and firm commitment to innovation. That is partly what the Government do in terms of research. However, we must also recognise that to stay in the world league, companies will have to come together to initiate joint research funding. That must not be looked at with suspicion or be seen as leading to a monopoly. Joint funding is happening and must be further encouraged to ensure that Britain remains a major manufacturer.
We need not only investment in plant and machinery, and innovation. There is also a need constantly to improve our training system. We need to keep abreast of new skills. We need to recognise that top-class training is required, and that will be expensive. People need to have more clearly explained to them the role of the training and enterprise councils at local level.

Mr. Streeter: Does my hon. Friend agree that the local training and enterprise councils are a great success story, especially in Devon and Cornwall? The TECs have made

dramatic inroads into training delivery. That is one of the many Conservative policies that are successes. It has set us up very nicely for the future.

Mr. Madel: I agree. My hon. Friend has referred to what has been done in his area, which is very welcome. The same point applies to Bedfordshire. We have a good training and enterprise council. However, both parts of the title need to be emphasised—the training and the enterprise. If we do not have the enterprise and if we do not get the jobs, we shall not be able to cure the unemployment problem.
We must manufacture our way out of the dreadful hole to which my right hon. and learned Friend the Chancellor of the Exchequer referred recently. I greatly welcome the positive role that the Department of Trade and Industry is now playing and the fact that the philosophy of my right hon. Friend the President of the Board of Trade is not for clumsy intervention in industry, but for Government support for industry, especially in innovation, in research and in training.
I want this Conservative Government to rediscover their historical role of achieving prosperity with a purpose. The purpose of prosperity is to ensure that we have real equality of opportunity. The British people want politics and policies that are decent, sensible and competent. I am certain that the Government will achieve all three aims.

Mr. Tom Cox: It is a great pleasure to take part in this debate. As other hon. Members have said, it is a very important debate. We know that our country prospers by our ability to produce and sell goods in the markets of the world. We once did. However, no matter what gloss the Minister has attempted to put on the debate, the position today cannot give us much pride or much hope for the future.
The debate shows how areas of our country differ. The Minister paints a glowing picture of life in the United Kingdom. I am prepared to admit that that may be true of industry in some areas. However, that is not true of London. We were once, not so long ago, one of the main industrial areas. There was a great deal of industry throughout London which produced goods that sold in the markets of the world. That industry offered a range of jobs to the people of London, and many of those jobs were extremely well paid. But where is the growth industry now in London and in much of the south?
The Minister should be aware that we in London now have some of the highest unemployment in the United Kingdom. We have young people who have never worked in their lives. We have men and women who are out of work for the first time in their lives and who do not know whether they will ever work again. We have people in their 50s who, sadly, are convinced that they will never work again. That is the picture in London. There are few work opportunities and there is little industrial activity.
We have heard in recent months—I suppose that we shall continue to hear this for some time to come—about the growth of the green shoots. I only wish that they were growing, and I am sure that that is the feeling of many hon. Members. Until those so-called green shoots start to grow and prosper, our problems will continue—sadly, for a very long time to come. Let me quote a comment made in March by Lord Prior, a former Secretary of State for Employment, who is now chairman of GEC:


It will require substantial effort over the next 20 years to get our manufacturing base back to the levels we want to see.
It would be hard to imagine a stronger criticism and indictment of the Government by a former Conservative Secretary of State.
Let us look at the figures. The Minister referred to the last Labour Government. Let us go back to the start of the present Government's period in office. In 1979—

It being Eleven o'clock, MADAM SPEAKER interrupted the proceedings, pursuant to Standing Order No. 11 ( Friday sittings).

Bosnia

11 am

Mr. Tam Dalyell (Linlithgow) (by private notice): To ask the Secretary of State for Defence if he will make a statement on the situation relating to British troops of the United Nations in the Travnik area.

The Minister of State for the Armed Forces (Mr. Jeremy Hanley): A series of incidents involving a convoy of trucks carrying humanitarian aid occurred yesterday and today near Novi Travnik. This was not an official United Nations convoy and had been organised by the local authorities of the town of Tuzla, whose population is predominantly Muslim; it was carrying supplies from the Dalmatian coast to Tuzla.
Yesterday afternoon, the convoy, which was not escorted, came into conflict with troops of the HVO—the Bosnian Croation army—4 km south of Novi Travnik. It seems clear that there were several Muslim casualties and it is believed that some Muslim drivers were taken away and shot.
Yesterday afternoon, units of the first battalion Prince of Wales Own Regiment—1 PWO—were ordered by UNPROFOR headquarters in Bosnia-Herzegovina to go to the scene to give protection to the convoy and to stabilise the situation. They were authorised to use force if necessary. They were subsequently tasked with escorting the convoy to Tuzla and the trucks were then designated a United Nations protected convoy.
At about 8 am local time today, three HVO soldiers engaged 1 PWO's Warrior vehicles with fire. 1 PWO, while protecting the convoy, first fired warning shots; but when the HVO firing continued, a further burst was fired from a Warrior. Two HVO soldiers were hit and a third fled the scene. There were no British casualties. I cannot confirm media reports that the HVO soldiers were killed, although that may well be true. I understand that the convoy subsequently moved forward in the direction of Tuzla via Vitez.
The incident graphically illustrates the hazards of delivering aid to those caught up in the conflict in Bosnia and the vital humanitarian role played by British troops and others in UNPROFOR. From the information available to me, I am satisfied that Bri`tish troops acted promptly and efficiently and fully in accordance with operational rules and procedures.

Several Hon. Members: rose—

Madam Speaker: Before we proceed, let me draw hon. Members' attention to the fact that the question deals specifically with British troops of the United Nations in the Travnik area. It goes no wider than that. It is a narrow question, and I hope that hon. Members will restrict their remarks accordingly.

Mr. Dalyell: As a national service man—tank crew with the Scots Dragoon Guards—40 years ago, I feel deeply for service men in danger. British and United Nations troops in the Travnik area are in one hell of a position.
What are the guidelines for their self-defence? What happens if the warlords in the Travnik area try to seek revenge? It seems to me that we are talking about a hiding to nothing. What warnings were given to the Croats? The Minister said that drivers were taken away and shot. Could he expand on the circumstances in which those


drivers were taken away? Are the rules of engagement the standard United Nations rules, and what precisely is the position as regards authorisation to fire or to return fire?
In relation to United Nations resolution No. 770, which includes the words "and others", may I ask about the position of non-United Nations convoys in the Travnik area? In particular, was there a request for the Muslim convoy to be escorted? What is the status of such requests and what is the mechanism by which they are made?
In the event of revenge for what has happened in the Travnik area, are we to augment forces? Will there be an escalation or withdrawal? That is a very worrying question, which has become acute this morning. Do we change the rules of engagement? What are the contingency plans for withdrawal or evacuation not only of United Nations military personnel but of aid personnel in the Travnik area?
What is the position of the sappers who were supposedly held at gunpoint by Muslim forces? Were they deprived of their equipment? Did they try to return fire, and were they advised to try to return fire?
What is the position of the RFA Argus and the artillery pieces that were available for British and United Nations troops to defend themselves? Are jets from Britain being deployed in readiness to defend safe areas and British forces in the Travnik area?
Finally, may I say that those who sit on green Benches had better be very cautious about making decisions that commit troops in a civil war?

Mr. Hanley: The hon. Gentleman has gone slightly wider than his original question, but I shall try to accommodate him as best I can.
The incidents that I described happened in the area to which the hon. Gentleman referred, and he is right that this was an unofficial humanitarian convoy. The convoy had asked for assistance, but UNPROFOR had decided that the situation in the area was dangerous and therefore did not give it permission to travel or to have assistance. It came under attack last night; the situation was reassessed and 1 PWO was sent to help it.
Our troops were acting on the orders of the United Nations command in Bosnia-Herzegovina and within the spirit of the mandate to provide protective support for humanitarian convoys. The soldiers came under fire, and, in such circumstances, they have a right to act in self-defence. That is exactly what they were doing. They were within their mandate throughout.
The United Nations command in Bosnia of course regards the incident as a serious one, but does not believe that it presages a general decline in the situation throughout Bosnia or in the British area of responsibility. Because we believe that there are serious issues to be addressed and a need to ensure that our troops are fully protected whatever the circumstances, my right hon. and learned Friend the Secretary of State yesterday announced that further troops were to be put in readiness lest they be needed. We are studying the incident, but I cannot give any further details.
The hon. Gentleman asked about the drivers of the vehicles who were taken away and shot. We have information that that could have happened last night. They would have been Muslim drivers of the convoy—taken by the HVO and killed. It is a disgraceful incident

and fully justifies the deployment of our troops. We must remember that there is no escalation at all in the role of those troops. They are there to support humanitarian aid. Right hon. and hon. Members alike fully understand the risks that are involved, but the general mood, both in the House and in the country, is that we are very proud indeed of our troops and of the way in which they are carrying out their humanitarian task. Of course we do not wish them to be put any more severely at risk than the situation dictates.

Mr. David Howell: May I congratulate my hon. Friend the Minister on assuming his heavy new responsibilities which I know he will discharge excellently?
Given the obvious fact that in the Travnik area relief work is becoming ever more dangerous—as it is elsewhere in Bosnia—as we see the carve-up of the state of Bosnia reflected in the violence around Travnik and in ever more blood-soaked violence, given the increasing difficulties for our own heroic troops and given United Nations resolution 836 passed on 4 June, which greatly extends the mandate for self-defence and retaliation for UN troops in Bosnia and in the Travnik area, will my hon. Friend assure the House very strongly indeed that he is keeping an hour-by-hour and day-by-day eye on the position of our troops in this area and in Bosnia generally and that he is monitoring them all the time to ensure that they are not left in an impossible position or in one where the conditions have changed but their equipment has not necessarily changed so that they are placed in great difficulties?

Mr. Hanley: I am grateful to my right hon. Friend for his opening comments. I assure him and the House that we are dealing with this matter at the Ministry of Defence and at the Foreign and Commonwealth Office, and my right hon. and learned Friend the Minister of State, Foreign and Commonwealth Office is on the Front Bench beside me today.
We are concentrating on the matter with every passing minute. Of course, information is difficult to come by immediately and that is why I did not comment earlier on the media reports. However, I can assure my right hon. Friend that we are monitoring the situation very closely, not only because of our duty to deliver humanitarian aid, but, as I said before, to ensure that our own troops are not placed at undue risk when delivering that aid.
My right hon. Friend mentioned Security Council resolution 836, which was passed on 4 June. He is right to say that that resolution gives us a greater right to react if our troops come under fire or if we need to withdraw our troops. However, that is a contingency plan and it has not been acted upon. The troops are now at a higher level of readiness and a squadron of Jaguar fighters has been allocated to NATO to await UN requests. Therefore, I believe that we are making a very sensible, very cautious, but very principled response to the humanitarian needs.

Mr. Paddy Ashdown: I also welcome the Minister to his new post and thank him for his statement.
Is it not the case that the situation is now fast descending into one of the utmost gravity? As the hon. Member for Linlithgow (Mr. Dalyell) said earlier, we now face a position, which many of us have predicted for some time, which is simply beyond control. We may have to consider not just what more we can do, but the reality of the need to withdraw—

Mr. Dennis Skinner: The right hon. Gentleman wanted them to go in before. He has come full circle.

Mr. Ashdown: Well, exactly so, and this has happened because we did not get a grip on this early enough.
I notice that the Minister did not comment on the very disturbing incident that took place in relation to the disarming and humiliation of British soldiers on the road from Travnik to Kiseljak. It is very easy to exercise outrage from the safety of 1,000 miles away. The fact is that those soldiers must have been placed in a very difficult position. I hope that the Minister will be able to assure the House that neither they nor their commanders will be blamed for the incident.
This was a humiliation waiting to happen. Our failure to provide a clear aim, as Manfred Woerner said, and to provide clear rules of engagement and a clear political aim has meant that UN troops—and British troops, among the finest in the theatre—have increasingly been treated with contempt by the Bosnian forces on both sides.
I hope that the Minister will realise that our soldiers on the ground, through humiliation or worse, will very soon have to pay a much more dangerous price because of the failure of will, politics, clarity and action on the part of this Government and others.

Mr. Skinner: I have never heard such a two-faced statement in my life. The right hon. Gentleman wanted more troops before. Now he wants them out.

Mr. Hanley: I am grateful for the welcome of the right hon. Member for Yeovil (Mr. Ashdown). However, I am somewhat puzzled by the stance that he is showing this morning. He was in the vanguard of those who wanted us to send more troops into the area. We answered the need in yesterday's statement in ensuring that troops were ready to go in, largely to protect our own troops carrying out their humanitarian responsibilities. It seems that the right hon. Gentleman has changed his mind because of yesterday's incident, which he called a humiliation.
It seems that the right hon. Gentleman, I am sure for the very best of motives, wants us to put in more troops, but as soon as they face any difficulty, they are to be withdrawn. The right hon. Gentleman mentioned yesterday's incident at Kiseljak. That was a totally unrelated incident in which two Spartan vehicles were stopped by Muslims at a roadblock near Kiseljak and were coerced at gunpoint into leaving their vehicles. They were then robbed of their weapons, ammunition and other equipment. They were released unharmed.
That was not a case of their rules of engagement being inadequate. They had to judge whether they should open fire and whether, if they had opened fire, they would have put the lives of their colleagues at greater risk. In very difficult circumstances, they decided to take what I regard as sensible actions. They are alive and their vehicles have been recovered. However, as I have stressed, that shows the difficulty of the situation in which our troops, in supporting the humanitarian aim, are bound to come under fire. They are bound to face difficulties of that sort.
Either we support the humanitarian aid and resolve with our troops and support them properly and have reserves on hand to protect them if necessary, or we get out. From what the right hon. Member for Yeovil said, I am not sure whether he wants us to withdraw now because he believes that we cannot continue. I wonder whether he

would like to say whether he believes that the situation is now perhaps so bad that we should withdraw the troops and tell us what the consequences would then be. How then would humanitarian aid get through? The right hon. Gentleman should think again about what he has said.

Mr. John Wilkinson (Ruislip-Northwood): May I also welcome my hon. Friend to his new appointment and wish him the very best in the execution of his duties?
As the two incidents which followed so closely upon each other—the disarming of Royal Engineers, including the taking of general-purpose machine guns from the Spartan vehicles and the returning of fire by the members of the Prince of Wales Own Regiment of Yorkshire and the possible killing of Croat gunmen—involved different communities, does that not demonstrate that it would be very unwise for Her Majesty's Government to become more deeply militarily involved in this intractable, inter-communal conflict?
My hon. Friend the Minister referred to the possible deployment of additional British air power to the theatre and the sending of a Jaguar squadron. The use of air power in the circumstances that he described would be an exceedingly blunt intrument and would probably provoke retaliation, ambushes and further attacks on British troops. Will the Government reconsider, at the earliest possible date, the full aims, strategy and objectives of our involvement in Bosnia and the Yugoslav region?

Mr. Hanley: I am grateful to my hon. Friend whose knowledge of the Royal Air Force and its capabilities is probably second to none in the House. However, the use of air power would be as a last resort, probably for the very reasons that my hon. Friend gave. The consequences of using what is, as he said, an extremely blunt and very violent instrument would have to be weighed very carefully indeed. However, that air power is in reserve. It is in reserve—and I cannot stress this often enough to the House—to protect our own forces who are carrying out their humanitarian role. There is no escalation of the role of our forces. If the troops that we have in the area now, who are supported not just by the RAF but by the Royal Navy, need further protection to carry out their tasks or to withdraw, they will be given that protection. But there is no increase in our role. There is no change in our aims and objectives, which are to bring humanitarian aid to anyone in Bosnia-Herzegovina who needs it, from whatever part of that troubled community.

Mr. Harry Barnes: Should not the mandate of the United Nations now be extended so that more ground troops begin to be available for the protection of convoys, the attempt to seal the borders from Croatia and from Serbia and the protection of safe havens where the populations are fully defended? The United Nations forces are doing a fine job, but their mandate probably needs extending and the resources need to be added to considerably.

Mr. Hanley: I answered the hon. Gentleman's question earlier. There is no need at this stage, we believe, to increase further the United Nations mandate. The United Nations has our troops available to help to protect the forces of the UNPROFOR in carrying out its humanitarian role. Of course, we are considering each day any further initiatives that might help to improve the delivery of that humanitarian aid.

Sir Peter Emery: Will my hon. Friend ensure that a message of support goes to our troops who are carrying out very difficult tasks in the whole Yugoslav area, particularly in Travnik? Will he tell the House whether there is a CSCE mission that covers Travnik? If not, would it not help to see whether the civilian side of the CSCE missions might be able to do something to lower the tension? All right hon. and hon. Members want to see the tension lowered so that we neither have to withdraw nor necessarily send more troops but can carry out necessary humanitarian work under the United Nations and the British Government, properly and fully to feed so many starving people in that area.

Mr. Hanley: I am grateful to my right hon. Friend for his question. There is no CSCE mission in Travnik. There is one in Kosovo. We do not foresee any change of role there.
I thank my right hon. Friend particularly for his message to our troops who are carrying out what most people would agree is a desperately difficult task, and they are carrying it out with such superb professionalism that all of us are rightly proud of what they are doing. We would not put them to any greater risk than is necessary, but my right hon. Friend's thanks to them for carrying out their role are most important and gratifying, and I will make sure that they are passed on.

Mr. Skinner: Is the Minister aware that, during these proceedings, Serbia has not been mentioned once? However, he will recall that, in preceding months when statements have been made about this matter, the blame has been laid on the Serbs from beginning to end.
Does not the series of incidents demonstrate, first, that the leader of the Liberal party got it wrong and does not have the grace to admit it and, secondly, for those who wanted to bomb the hell out of Serbia, that it is now apparent that the three contending forces—the Croats, the Serbs and Muslims—are all in battle together? Will he accept also—

Madam Speaker: Order. The hon. Gentleman is abusing the private notice question. I indicated that it is somewhat limited. I was very tolerant in allowing a little straying from the point, but the hon. Gentleman is going much too far.

Mr. Skinner: Does the Minister accept that the incident in which British troops were involved demonstrates that, instead of having more British troops there, and instead of carrying out the wishes of the German nation, it is time that they brought the troops out? One thing is certain: when there is a cocktail of religion and nationalism, war is not very far around the corner.

Mr. Hanley: The hon. Gentleman's comments have been greeted by the House, as they usually are, with a measure of disbelief and disrespect inasmuch as he has mentioned the Serbs. We did not mention the Serbs today for the simple reason that, to our knowledge, they were not involved in the two incidents. The Serbs are greatly responsible for a number of atrocities in that area. It is perhaps right that we should remember today that it is not merely the Serbs but the Croats and the Muslims—it is all sides of the terrible struggle—who are to blame not just for the incidents that we have seen in the past 24 hours but for many incidents over the past few months. It is a very

difficult and intractable problem. The issues that we are dealing with today are about Novi Travnik, and that is why the Serbs were not mentioned in my statement.

Mr. Jim Lester: I am most concerned about the current situation on the ground in Travnik. From what my hon. Friend has said, it is clear that the judgment was that the convoy should not have gone because it was unwise to do so. The fact that it did so without protection speaks for itself. My concern is that the subsequent judgment to put British troops in the position of trying to deal with that convoy, which I understand was seven miles long and involved many vehicles—our own troops had about 12 vehicles—has put them in an impossible military position if the whole thing breaks down as a result of what has happened.
What I should like to hear from my hon. Friend is the repeated assurance that, whatever steps can be taken to ensure their position should the situation break down—I understand that it is impossible to get ground troops in to reinforce them because of the nature of the terrain—and to ensure that it is understood on the ground that those troops are trying to do a job for the United Nations and to protect that convoy in an impossible situation, the troops will have every support that we and the United Nations can offer, from wherever it needs to come.

Mr. Hanley: I am grateful to my hon. Friend. The United Nations protects any United Nations-organised convoys, but we cannot and could not protect every convoy that wants to travel, even though they are likely to be at very great risk. However, situations change. Of course, in this case UNPROFOR decided that this convoy should become official to protect those people who remained in it. It was a large convoy of humanitarian aid. Therefore, there is no need for me to expand upon my hon. Friend's wise words.
There is certainly no intention to pull out at this stage, for the simple reason, as I have said a number of times, that it is our duty to deliver humanitarian aid. There are people in great need. I am very surprised at the callous and selfish nature of the hon. Member for Bolsover (Mr. Skinner), who believes that the delivery of humanitarian aid in such circumstances should be condemned.

Mr. David Trimble: Surely this incident reveals the self delusion that is at the heart of our current role in Bosnia. Humanitarian aid is aid. Food and medicine have military value—after all, armies march on their stomachs. Surely it is folly to think that, in an area where there had been heavy fighting with Muslim attacks on Croats, we could then have a Muslim convoy wandering around the area without stirring up trouble. Although we might consider ourselves to be neutral, if we intervene there we would be seen as intervening on one side. Please, in this situation, before we talk about adding additional resources, could we first reassess the objectives? Our present objectives are incoherent and self-delusory.

Mr. Hanley: I do not doubt the hon. Gentleman's sincerity in this matter, but I doubt whether he accepts that we are doing the very best that we can to help to deliver humanitarian aid, and that in itself is an aim; that is an objective. There is no muddling about that objective. There might be many decisions to take and various ways


in which we can help to deliver that aid, but it is the United Nations' role to try to make sure that what is needed is escorted and brought to those people.
It is a very difficult situation. We are not at war. What we are doing is supporting a humanitarian role, and I believe that that is a noble aim. If there is some insecurity, and if there are some parts of the policy that the hon. Gentleman finds unclear, it is purely because it is a very unclear matter. One has to react to difficult circumstances with every passing day. In the meantime, we are doing what we can to help that troubled area, and we will continue to do so as long as it is safe.

Mr. Ian Taylor: My hon. Friend the Minister has eloquently stated the dangers that our troops face in a very worthy cause, which is to deliver or help to deliver humanitarian aid. Will my hon. Friend assure me that our troops will not be put in an impossible practical situation on the ground? However worthy the aim, the dangers will escalate.
Will my hon. Friend discuss with the Foreign Secretary and the Minister of State how NATO and the Western European Union can respond? There has been a lot of talk about how we might further protect our troops and ensure that our efforts in and around Travnik and elsewhere in the former Yugoslavia can be made more effective in our attempts to help the populations. But unless we back up current resources with extra resources, I am afraid that our forces will be put in an impossible situation. It is not fair that we politicians should demand that of the military.

Mr. Hanley: My hon. Friend neatly puts his finger on the heart of the dilemma. The safety of our troops is paramount; we keep it continuously under review. We have contingency plans to provide additional protection for our troops—they were announced yesterday—either to enable them to carry out their mission or to assist with a withdrawal, if it came to that. No one at this stage is contemplating a withdrawal of UNPROFOR, which has done, and continues to do, sterling work, and which has saved many thousands of lives. I believe that that is worth supporting.

Mr. Tony Banks: Trying to stop people acting barbarously towards each other and slaughtering each other is an extraordinarily difficult task, but it is one which civilised nations should continue to pursue. The incident at Travnik clearly showed that it is only a matter of time before British troops are engaged in full-scale confrontation with one force or another. So it is time seriously to contemplate whether British forces will be withdrawn from the United Nations contingent or whether we will ask the United Nations massively to increase the number of troops on the ground—which it should have done a long time ago. My feeling is that we should ask the UN to do the latter. Will the Minister go to the Security Council to get a decision taken now, not when our troops inevitably start coming under fire?

Mr. Hanley: The United Nations is taking pains at this moment to try to increase the number of troops from the world community to help in the safe areas. I have said what our role is. We are proud of our membership of UNPROFOR and of the help we give it. I believe that UNPROFOR is proud of the professionalism which the British forces are devoting to its humanitarian effort.

Mr. Julian Brazier: I wish my hon. Friend well in his new and already uncomfortable role. The two incidents that he described, particularly the second, which involved the humiliation and disarmament of British soldiers, surely illustrate once again that their role in Bosnia involves doing something that British soldiers have never before been asked to do. Tiny packets of soldiers, unprotected and unsupported, are operating in the middle of a bloody civil war. I put it to my hon. Friend that that cannot continue for much longer. I for one—

Madam Speaker: Order. I am afraid that hon. Members are indulging in debate. Much as we are interested in the hon. Gentleman's views, this is the time to question the Minister, not to make long statements.

Mr. Brazier: Thank you, Madam Speaker.
Will my hon. Friend accept that this sort of humiliation and disarmament of British soldiers is unacceptable, and that we cannot keep them much longer in this sort of role?

Mr. Hanley: My hon. Friend has stated that the incident at Kiseljak was a humiliation. I would say that it shows the professionalism of British troops; they were using their heads rather than their guns. They have saved their lives; all of them returned from what could have been a difficult situation. Had any of them opened fire, one of their colleagues might have been killed. Details are still coming in and we are still studying the whole incident, but the fact that the troops returned and brought their vehicles with them shows their courage and commitment to carrying out a very difficult role. I do not regard that as a humiliation. These men were doing their duty and they lived to fight another day.

Mr. John D. Taylor: I join other Members in welcoming the Minister to his new position.
Does the hon. Gentleman realise that on both sides of the House there is tremendous concern about the position in which British troops find themselves in Bosnia? Does he accept that matters will escalate, that lives will be lost and that there will be many more Travniks until the Government cease to recognise and to try to maintain that failed entity known as Bosnia?

Mr. Hanley: The situation there is serious, as we all understand. The fact that we have allocated to a state of higher readiness more troops in support of our forces carrying out their humanitarian role shows that we recognise what the right hon. Gentleman has said about the escalation of difficulties in Bosnia-Herzegovina. At the Ministry of Defence and at the FCO we day by day take account of the risks involved and of the capability to fulfil the humanitarian aim.

Mr. Iain Duncan Smith: I have served in the Army and have seen service in various positions and places. Further to the question asked by my hon. Friend the Member for Canterbury (Mr. Brazier), may I add that my concern is that, because of their reputation—it is well earned—there is a temptation to put British troops into impossible positions because of their known capabilities. I therefore urge my hon. Friend to assure the House that we will review certain recent actions so as to be certain that our soldiers are not being placed in invidious positions in which their role becomes impossible.

Mr. Hanley: My hon. Friend must be right to say that we should avoid placing our soldiers at undue risk—that


is self-evident. I disagreed with my hon. Friend the Member for Canterbury (Mr. Brazier) about whether this was a humiliation. We could not have foreseen the incident. Apparently, a roadblock was put up by some Muslim soldiers, although the exact details have yet to come in. I would not have regarded that as an impossible position; nor could it have been foreseen—at least, no more than other dangers and difficulties can be foreseen in this unfortunate theatre. I stress that if lives are likely to be put at risk, that is done with the Government's permission and the sanction of the United Nations. We shall carefully examine every change in circumstances, such as the one to which the hon. Member for Linlithgow (Mr. Dalyell) has rightly drawn attention.
This has been an important small debate—in effect—showing the seriousness with which the House treats this matter. I am pleased that my hon. Friend, whose professionalism is well known to us all, has drawn attention to the risks that our forces are undergoing in difficult circumstances to carry out their tremendous humanitarian role and the saving of many thousands of lives.

Mr. Nicholas Brown: Let me make it clear that our troops, who are operating in difficult and dangerous circumstances, not to take sides but to bring humanitarian relief to people in the most desperate circumstances, have the support and admiration of the Opposition.
I realise that the Minister's answers are effectively holding answers and that we shall have to return to this matter next week as the situation moves on, but his answers still will not do.
The Minister has been repeatedly asked to spell out the orders under which our troops, acting under the United Nations protection force, are operating. He must do so. He has confirmed that the convoy in question was not operating under the UN humanitarian aid programme. Is it acting against advice by heading into the dangerous battle zone in which it now finds itself? It must be incumbent on the Minister to explain the involvement of United Kingdom troops in the operation. What is to happen now? Will our troops be left in this dangerous situation, perhaps awaiting reprisals? Will they be reinforced—the Minister spoke about further troops being in readiness—or are they to be withdrawn to safety?

Mr. Hanley: I thought that I made it clear at the beginning of my answer to the original question that the convoy was not an official United Nations one and was therefore not being protected. Therefore, perhaps it was most unwise for it to proceed on its journey. The need for humanitarian aid in Tuzla is well understood and perhaps to some extent we cannot blame people for trying to make progress with this large convoy. I said that, following the incidents yesterday, UNPROFOR sent in 1 PWO to help, and from that moment the trucks were designated as a United Nations protected convoy. It remains such a convoy and it is now proceeding.
I have spoken repeatedly about the rules of enagement and they could not be clearer. Our troops are allowed to fire to protect their lives. If they come under fire and believe that they are in danger they are entitled to engage.

Points of Order

Mr. Donald Dewar: On a point of order, Madam Speaker. May I draw your attention to serious developments over the past 24 hours in the debate on the future of invalidity benefit—[Interruption.] I should like to make my point of order before the claque start to shout. These are serious developments for the future of invalidity benefit and the welfare state. We now know that fundamental changes—I think that is understating it—are contemplated to invalidity benefit eligibility with the intention of making sure that 20 per cent. of those who presently qualify will not qualify in future for the level of benefits—[Interruption.]

Madam Speaker: Order. What is the point of order?

Mr. Dewar: I shall, of course, come to it, but it is important to outline the basis upon which I seek your help. We know that eligibility and the level of benefits are to be attacked and that taxation is to be imposed—[Interruption.]

Madam Speaker: Order. I am trying to listen to the hon. Gentleman whose point of order must be to me and must not give long explanations. He obviously wants to know whether our Standing Orders or our procedures are being abused. That is what points of order are about and I am sure that the hon. Gentleman will come to the point right away.

Mr. Dewar: I will indeed, Madam Speaker. It is my understanding of at least the courtesies and probably the rules of the House that if repeated statements are totally incompatible with subsequent events—and that is true in terms of what the Prime Minister said in Wednesday's debate and what the Secretary of State for Social Security has repeatedly said—the proper course is for those who are responsible, for whatever reason, for misleading the House to come to the House and put the matter right at the first possible opportunity.
It is most important for the House and in terms of the anxieties, which cannot now be seen as groundless, among those who are in receipt of invalidity benefit, for an early statement to be made about the incompatibility, the yawning gap, between assurances that were offered and the reality of what is happening.

Mr. David Shaw: Further to that point of order, Madam Speaker. Is it in order for an Opposition Member to allege that Ministers made misleading statements to the House when Ministers have spoken about what is in the national interest, namely, that a proper public expenditure review is being carried out and that nothing has been ruled in and nothing has been ruled out? Invalidity benefit cost about £800 million in 1979–80 and now costs—

Madam Speaker: Order.

Several hon. Members: rose—

Madam Speaker: Order. Hon. Members must resume their seats. I can adequately deal with the point of order by the hon. Member for Glasgow, Garscadden (Mr. Dewar). The hon. Gentleman finally asked whether a Minister was coming to the House to make a statement. I have not been


told that a Minister is coming to the House this morning to make any statement. That is the end of that point of order and we shall now proceed with the debate.

Sir Peter Emery: On a point of order, Madam Speaker.

Madam Speaker: Is it a different point of order?

Sir Peter Emery: Yes.

Madam Speaker: In that case I must listen.

Sir Peter Emery: Can we not assist the Chair by ensuring that points of order are made properly and not abused in a way that seems to make your task more difficult? Surely all Front-Bench speakers should set an example and not attempt to abuse points of order.

Madam Speaker: I am always more than delighted when an hon. Member seeks to assist the Chair. That seldom happens to me.

Mr. Alan Williams: I hope to do precisely that in my point of order, Madam Speaker. Is it correct that the procedures of the House put you and hon. Members in a somewhat anomalous position on Fridays, in that we are not allowed on that day to ask for an emergency debate on the Monday under Standing Order No. 20? That sometimes leads to ingenious points of order which are to your embarrassment and to ours. Bearing in mind the genuine concern expressed by the Opposition, may I, through you, ask Ministers who are present to relay to their colleagues in the Department of Social Security the Opposition request for, if not a debate, at least a statement on Monday?

Madam Speaker: I need hardly draw the attention of the House to the fact that two members of the Procedure Committee are present in the Chamber. I want no more points of order about procedure because I have dealt with that and we are about to return to an important debate.

Mr. Harry Barnes: On a point of order, Madam Speaker.

Madam Speaker: Is it on a different matter?

Mr. Barnes: Yes.

Madam Speaker: In that case I shall listen to it.

Mr. Barnes: It is about your authority in terms of what appears in or what is missing from Hansard. I asked a question about standard spending assessments being listed for England and they have been listed in detail per head of population, but not in Hansard. They have been placed in the Library, although Hansard often gives long answers involving detailed lists. The matter is important for Derbyshire because most of the authorities there, apart from Derby itself, fall in the middle or in the bottom part

of the league table. It would be of great interest to my constituents to know that North-East Derbyshire is 295th out of 296 authorities. All the other authorities in what might be called the doughnut of Derbyshire have been established by the local government boundary commission and are abysmally low in the table. They include the authority in Derbyshiredale—

Madam Speaker: Order. The hon. Gentleman's point of order is becoming a debate but I think that I understand his point. It is at the discretion of Ministers whether a lengthy answer—and the hon. Gentleman recognises that the one he mentions is lengthy—is printed in Hansard. or made available in the Library.

Mr. Peter Mandelson: On a point of order, Madam Speaker.

Madam Speaker: Is it a different point of order?

Mr. Mandelson: Yes. What is your authority and what are your powers to represent hon. Members who seek to question Ministers, in my case the Prime Minister? Before the Whitsun recess I put a question to the Prime Minister which was answered on his behalf by the Leader of the House. It was about Government proposals to introduce charges for hospital stays. On behalf of the Prime Minister, who was unavoidably detained with Her Majesty the Queen unveiling a statue, the Leader of the House gave an answer that was at variance with an answer by the Prime Minister on a previous occasion on the same subject.
I subsequently wrote to the Prime Minister asking where the truth lay in this matter and asked who spoke authoritatively for the Government, whether it was the Prime Minister on the former occasion or the Leader of the House subsequently. Despite the amount of time that has elapsed, the Prime Minister has not responded to my letter. I understand that the Prime Minister is preoccupied with the present—

Madam Speaker: Order. I have the hon. Gentleman's point. If he wishes to pursue the matter he could do so by way of further questions. I am sure that he will understand, as the House does, that I am not responsible for ensuring that letters are answered by the Prime Minister's office. I have a big enough jolt in my own office seeing that my letters are answered and I want no further responsibilities in that respect.
Before I call the hon. Member for Tooting (Mr. Cox) to resume his speech, I must tell the House that a number of hon. Members are hoping to speak in the debate. I have been generous in allowing quite a long time for the private notice question. It was important and I wanted to allow sufficient time. I hope that I will now have the co-operation of hon. Members in not speaking for too long and in exercising self-restraint so that I can call all those who wish to speak.

Manufacturing (Productivity)

Question again proposed, That this House do now adjourn.

Mr. Cox: I was explaining to the House that in 1979 more than 7 million people were employed in the United Kingdom manufacturing industry. That figure has now dropped to 4·5 million. Indeed, last year well over 200,000 manufacturing jobs were lost. Our major companies such as ICI, Ford, Rolls-Royce and British Aerospace are now shedding jobs. As my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) said, this country is not taking the action or making the effort required to revitalise our manufacturing base.
The Economist recently published a survey showing that the United Kingdom trade deficit in manufactured goods will reach £17 billion this year, compared with a surplus of £5 billion in 1982. That can be described only as a dramatic and devastating decline over the past 10 years. In April 1993, just a couple of months ago, the Association of London Authorities published a report named "Business Failures in London". It showed that 11,000 more businesses folded than were established in the Greater London area in 1992.
On 28 April, a delegation from the London boroughs, together with London business leaders, went to Brussels to lobby the European Commissioner about European regional aid for London. As a London Member, I find it unbelievable that our capital city has to lobby for European regional aid. All hon. Members should think about that. Against that background, how does London fit with the Minister's claims this morning—and which we hear constantly from Ministers—that there are enormous improvements throughout the country?
I have been privileged to be a Member of this House for 23 years. When I came to the House there were massive employment opportunities in London. Many industrial complexes were offering all sorts of work and making goods that were selling throughout the world. Any hon. Member who doubts the seriousness of the present position in London and, indeed, in may other areas in the south, should read the report in The Economist of the survey by the Henley centre for forecasting. That shows clear evidence of the current position in London.
The Economist states:
The Henley Centre report 'The Case for London' argues that London is more than eligible enough for 'special case' consideration under the new criteria for European Community Objective Two Status—the European Regional Development Fund. If successful, the bid could be worth 100 million to London … Henley says that only 17·8 per cent. of London employees work in industry, compared with an EC average of 33·2 per cent. and a UK average of 32·8 per cent. Only 12·7 per cent. of London employees are in manufacturing, compared with a UK average of 23·1 per cent.
I suggest that hon. Members take note of another comment in the report—that in the early 1980s seven people were chasing every job vacancy in London; now, 57 people are chasing every one. The report also points out that in the London area during that same period well over 700,000 industrial jobs were lost. That is the background to the plight of London.
The Henley report stated:
The London Boroughs Association vice-chairman of policy and resources, Councillor Andrew Boff, who will be in Brussels added: 'It is not often that Labour and Conservative politicians, the trade unions and businessmen come together

to speak with one voice. It shows that right across the spectrum there is agreement that London should be given Objective Two status.'
As a London Member I would welcome—as I am sure other London Members would—£100 million for London. It would certainly revitalise the areas where there has been the greatest decline. However, I repeat that I find it unbelievable that the capital city of this country has to go cap-in-hand to Brussels to ask for some of the regional development fund. That is the indictment of the people of London against the Government.
In response to Madam Speaker's request for short speeches, I shall not make some of the comments that I had intended to make. However, some comments need to be made. Ministers repeatedly say that they back British industry. Let us consider a couple of recent examples. They really backed the coal mining industry. It was a total commitment to looking after British industry and British jobs. The Minister has a mining background and I grew up in south Wales. He knows that one of the industry's great achievements was its ability to sell mining equipment throughout the world.
I recently met a delegation from Chile, which is holding a large mining exhibition next year. I was asked whether British mining companies would be there. I hope that they will be, but we all know that when a major industry collapses—as, sadly, the British mining industry has done as a result of Government policies—other sectors dependent on that industry do not have long-term prospects.
What about Leyland-DAF? It appears that that company will be saved, but not thanks to our Government. By contrast, our European partners said that they would do all that they could to help any Leyland-DAF bases in their countries.
Many of those who came to the House from an industrial background took great pride in the number of apprenticeships offered to young people. In 1979, more than 150,000 apprenticeships were offered across the whole range of industries. In 1991, the figure was down to little more than 50,000. We are frequently told, as we were this morning, that one of Britain's greatest problems is its lack of a skilled work force—yet year by year, we see a decline in the apprenticeship opportunities offered to young people.
My hon. Friend the member for Newham, North-West (Mr. Banks) and I are members of the British delegation to the Council of Europe and both serve on its social and health committee, which discusses work, social and health issues of crucial importance to this country and to many others. If the Minister is so confident of the Government's achievements, I hope that he will accept an invitation later this year or early next year to address that committee in the same glowing terms that he used today, and say how wonderful everything is with British industry. He would be listened to with rapturous attention.
Before the Minister does that, he ought to do some homework—because high on the committee's priorities would be an explanation from the Minister as to the Government's social dumping policy. The committee comprises parliamentarians from all member states. My hon. Friend the Member for Newham, North-West and I, and Conservative Members who serve on the committee too, are often asked to justify the social dumping that this Government encourage, and which is costing jobs in other member states.
I hope that the Minister accepts my invitation. I assure him that our French and German colleagues are dead keen to know how he justifies the Government's current policy, which is much to the detriment and annoyance of our European colleagues.
The chairman of the 1922 committee, interviewed on radio this morning, was asked about last night's meeting. He said that it was wonderful, and that everybody there fully supported the Prime Minister. He suggested that the Government's real problem is presentation. He said, "Our policies are superb. We all agree that everything is remarkably well now, but our presentation is wrong." Conservative Members know as well as we and the public do that what is really wrong is not the Government's presentation—though I agree that is not good—but the policies that they have pursued for so long.
If everything is so good, why is Britain in such an economic mess? I hope that we shall be told the reasons. Above all, I ask the Minister and his officials to accept my invitation, which I know my hon. Friend the Member for Newham, North-West would also extend, to address the Council of Europe's social and health committee. We look forward to that with great interest. We would not have to say anything, for our European colleagues would have a field day with the Minister.

Mr. Julian Brazier: We as a party have an excellent story to tell. I welcome my hon. Friend the Minister to his new appointment. I was privileged to work with him as a Parliamentary Private Secretary for the past year and know what an excellent Minister he is.
Between leaving university and becoming a Member of Parliament, I worked in industry and subsequently for consultants to industry. I welcome this debate not only because of my own background but because, contrary to popular perception, manufacturing forms an important part of employment in my constituency. Canterbury has the world's best leather company. The leather on which we sit in the House of Commons, the leather in the White House and the leather in Rolls-Royces all comes from Canterbury.
My constituency is also the home of the world's number one specialist papermaker, in terms of both turnover and quality. The trading estates in Whitstable, in the north of my constituency, include a company which exports electrical parts to Taiwan, and Amphenol, which is a leading supplier of connectors to the computer industry. At a new Joseph Wilson industrial estate in Whitstable every site has been let despite the recession.
The hon. Member for Tooting (Mr. Cox) made a plea for London. There is a fair regional point to be made in that respect. Because money has been poured, through various forms of selective aid, into the more distant parts of the United Kingdom, London and the south-east have done less well in relative terms in some respects and now have high unemploymnet levels. I hope that the hon. Gentleman will echo those of us in south-east England who argue for development status to be moved from areas that now have low unemployment—although one would not believe that, listening to the whingeing by Members of Parliament who represent those constituencies—and into areas that genuinely need help. Even without that assistance, companies in my constituency are putting in a remarkable performance.
The hon. Member for Tooting spoke about going cap-in-hand to Brussels for handouts. I remind him that he supports a party that, when last in government, went cap-in-hand not for regional development funds from a perfectly legitimate source but to the International Monetary Fund, for a loan to bail out the country.
My speech divides into three parts. First, I shall address the general economic situation and the monetary climate, which is central to manufacturing; areas in which the Government have sought, rightly, to improve our manufacturing performance; and a specialist area of particular interest to me, which is much underrated as a factor in the manufacturing economy.
As to the general economic situation and the monetary situation in particular, we should not delude ourselves that the monetary climate set for businesses is the most important factor in their ability to be successful. We are right to be proud that inflation is at its lowest level for a generation and—when we see deepening recession in the rest of Europe—to be pleased that recovery is under way. In this debate, we have particular reason to take pride in the remarkable achievements made in manufacturing productivity and export growth.
The key monetary question for manufacturing industry and the service sector, but particularly the former, is how we decide which way to move the main monetary lever of interest rates. We have chosen broadly the right criteria. They are the money supply figures, to which I tend to give most weight, the exchange rate and asset prices. I would add labour costs and the position in our key export markets, as that knocks on into capacity and potentially into the scope for non-inflationary growth.
It is clear which way we should move the main monetary lever. The broader measure of money is at a very low level, at 3·5 per cent. growth. It is true that the narrow measure is at the top of our range at about 4 per cent., but I suggest that the range itself is rather tight—and anyway, the narrow measure is falling.
The most important asset prices are those for houses and commercial property. House prices are important because of the influence that they have on the willingness of many households to spend. Our banking sector is so heavily lent to the commercial property sector that commercial property prices are profoundly important to the willingness of bankers to lend. I welcome lower house prices for those young people who want to buy houses and the last thing that I want to see is property price inflation. We should realise that there is no danger of an inflationary take-off in either of those two areas.
The exchange rate fell from its unsustainably high level in the ERM to a much lower level, but it has come back part of the way since then. There is no great fear of an inflationary take-off. Those people who were saying a few months ago that it could happen have largely been proved wrong. What we have seen is that those people in the United Kingdom who are selling imports have had to accept lower margins—they have not been able to increase their prices.
The next item on the list is the situation in our export markets. As I said, we have already seen a fall in demand in most of our main European trading partners and a slowdown in recovery in the United States. That suggests that there may be difficulties that are not of our making. The final matter affecting monetary policy is unit wage costs, which are at an exceptionally good level at present. Indeed, they are falling slightly, which is a remarkable


achievement and an important quasi-monetary indicator. The whole list points in the same direction. We should be thinking about easing the money supply, rather than tightening it. If we want one strong case this morning against an independent Bank of England, it is that the Bank of England is saying that the worries are in the other direction at present.
I shall focus more specifically on the manufacturing economy. I suggest that the Government have achieved a remarkable transformation in a whole range of different areas. We have freed up the labour market from the level of strikes that made us the laughing stock of Europe with the British diseases of le "tea-break" and le "time-to-down-tools". We now have the lowest level of strikes for a century. Much more significant than that—because people can say that it is a fear of unemployment and so on —is that just before the recession started we had the lowest level for 20 years.
The hon. Member for Tooting mentioned the decline in apprenticeships. When a large number of apprenticeships were tied in, sadly, to the industries of the past, there was bound to be a decline in the traditional form of apprenticeships, but the expansion in the new forms of vocational qualifications and the availability of training places to all school leavers in the United Kingdom is the way forward.
Export support is another important area. The interim report published yesterday by the Engineering Employers Federation is a thoroughly positive document which commends a whole list of different areas of the Government from the Prime Minister's support to the work of the DTI and many other Departments, including the Department of Employment. In the report, the federation specifically picks out the expansion of ECGD cover as one of the areas on which the Government must be congratulated.
Another area in which the Government are moving policy forward is a new attempt to forge a partnership with industry. No one wants to see us return to the corporatist days of the 1960s and 1970s when we had the absurd situation of Government Ministers and civil servants trying to guess winners and back them. There should be a partnership to discuss a whole range of issues such as training, export support and science and technology. That brings me to the welcome publication of "Realising our Potential" by my right hon. Friend the Chancellor of the Duchy of Lancaster. My hon. Friend the Minister said quite a lot about it and picked out almost exactly the points that I was going to make. Therefore, I will not repeat what he said beyond saying that the annual review is important.

Mr. Cousins: Does the hon. Gentleman share my concern that, alone among the industrial countries, spending on research and development by businesses in the United Kingdom has fallen, whereas in every other industrial country it rose in the 1980s?

Mr. Brazier: The short answer is yes—the longer answer is that the hon. Gentleman should wait about five minutes because I shall come to that point.
Another area in which the Government have assisted industry enormously is tax reform. We have a much lower corporate tax rate and a simplified tax regime. The final

item on the long list is the deregulation initiative. I know that my hon. Friend the Minister will sympathise with me on this point. It is important for the deregulation initiative to succeed and be seen to succeed because there is a strong feeling among many business men in my constituency and in constituencies up and down the country that there is a tendency for Brussels and Whitehall to regulate about it if they can see it. The deregulation initiative is exactly what is needed to separate our essential requirements for health, safety and consumers from those that are essentially unnecessary.

Mr. Mark Robinson: Does my hon. Friend agree that cost compliance on new regulation is an extremely important part of the package?

Mr. Brazier: That is a most important point and I am grateful to my hon. Friend for making it.
I shall focus on an area that is underrated in terms of its importance for manufacturing industry in the United Kingdom, although it applies to a lesser extent in some other types of business. It is the issue of ownership. Immediately before I entered the House I worked for a Swedish consulting company. Almost all its clients were in manufacturing industry of one sort of another. I was struck by the strength of the charge—it is a less serious charge now than it was 10 or 12 years ago—that many British industrial companies still have an outlook that is too short. The point made by the hon. Member for Tooting is just one illustration of that.
We have a record of low commercial research and development spending in many sectors, but there are some honourable exceptions. The pharmaceutical and aerospace industries have excellent records on industrial research and development spending. However, too many sectors in manufacturing industry are not spending enough of their money on research and development. On other occasions, I have bored the House by looking at the state of our patent laws. We partially addressed that with previous patent legislation. One reason why the pharmaceutical industry is such a good exception is that its patent law is in a good state compared with other areas, so it had a much better incentive to invest.
In the third and final section of my speech I shall focus on the issue of ownership. The best United Kingdom client that we had in the consulting firm for which I worked was JCB. The reason why it was the best United Kingdom client and was willing to look ahead any number of years ahead was that it had one shareholder. If that shareholder, Mr. Bamford, wanted to take a long-term view, he did not have to look over his shoulder. This is not simply an appeal for family companies—it goes wider than that, although the family business is a vital part of our economy. The recent measures taken by the Government through changes to the inheritance tax law in the past two or three Budgets are important and encouraging.

Mr. Tony Banks: I hope that the hon. Gentleman will develop what he said about Mr. Bamford not having to look over his shoulder, because I thought that the Government's policy was to increase share ownership in the United Kingdom. It is not encouraging news for those people who have bought shares to know that a Conservative Member believes that all companies should be reduced to having one shareholder, unless the hon. Gentleman did not mean to say that at all.

Mr. Brazier: The hon. Gentleman has anticipated almost exactly the point I was next going to make.
I am not arguing just for family ownership. There are several effective ways of owning a company that ensure that it has a long-term perspective. In the capitalist world, the three most common successful ones are, first, family ownership, secondly, widespread individual ownership, with individual shareholders giving the directors a tough time at annual general meetings, and, thirdly, there is a method that is not used much in this country but which is practised widely on the continent: banks can have strong regional links. They take a long-term view and own substantial chunks of companies.
The worst possible form of ownership—unfortunately, there is too much of this in the United Kingdom—is that of the faceless pension fund. The trustees are legally compelled to focus on the immediate financial return. They rarely play an active role in the direction of a company's affairs. They seldom ask tough questions at annual general meetings. They seldom sack directors. That has resulted, in some of our less good companies, in directors being allowed to believe that they are the masters of those companies, not the stewards of the owners. A capitalist system where that is allowed to happen immediately becomes less effective.
The result is that directors vote themselves enormous pay rises, even though they have not earned them by improved performance. I do not begrudge Lord King a single penny of his pay rises, because he made a remarkable success of his business. However, I object to companies whose profits have slumped giving the managing director a 50 per cent. pay rise. That has to be compared with the position in Japan, where directors are often paid modest salaries.
Short-termism can also be seen in scientific research and in takeovers. All too often, one company acquires another company, not to benefit the shareholders but because it enlarges the power base and empire of that company. My former employers carried out a survey of acquisitions within one segment of the European Community which showed that the vast majority of acquisitions did not benefit shareholders except where the acquisitions were in the same business and designed to increase market share.
This is the dog that did not bark. This is the hidden area of industrial policy—the ownership issue. I have two suggestions to make, both of which are fairly radical. First, we should grasp the nettle, use the size of the public sector borrowing requirement as an excuse and end, once and for all, the tax advantages that pension funds have over individual investors. Either we should bring the rights of the person who wants to manage his own savings for retirement up to the level of the pension funds, or we should lower the tax advantages that the pension funds enjoy to the same level as those of the individual saver. We should end the enormous advantage that institutional investors have in the investment markets.
Secondly, we should tighten the law on takeovers. The right way for a healthy market to operate is by companies competing vigorously against each other. Healthy competition is not encouraged if companies are simply allowed to buy up other companies. In some cases. sleepy companies that just happen to be big, for historic reasons, are allowed to buy small but dynamic companies which are then sometimes ruined. A much more difficult climate for takeovers should be created. We have one of the easiest

climates for takeovers in the developed world. Having done business with companies in America, which we think of as an extremely capitalist economy, I know that it is much more difficult for companies to be taken over there as a result of the Clayton Act and the Hart-Scott Rodino amendment than it is in this country.
I end by repeating what I said at the beginning of my speech: we hear a lot of gloom and doom from the Opposition. It must be intensely painful for them to see, despite all their gloomy predictions, the British economy recovering while the rest of Europe goes into recession. It must also be intensely painful for the Opposition to see that inflation is down below 2 per cent. They must be very embarrassed by the strong performance of so many good British businesses, including many in my constituency. We have every reason to be confident in the splendid team that we have in the Department of Trade and Industry, which will be playing such an important role in developing this initiative.

Mr. Tam Dalyell: Long ago, in the mists of parliamentary time—to be precise, on a Friday in 1962 —I was given advice by James Chuter-Ede, then aged 80— he of the 1944 Butler-Ede Education Act and, indeed, Mr. Attlee's Home Secretary. "Laddie," he said—he called any hon. Member under the age of 50 "laddie", for he was a figure in a black coat and wing collar and he was a very wise man—"if you want to put an unpopular case before the House, do it on a Friday."
Today I wish to deploy an argument which, I confess readily to the Minister, is as unacceptable to the Opposition Front Bench as it is to the Government: that British manufacturing industry is being greatly disadvantaged by the imposition of United Nations sanctions against two of our best traditional markets, Iraq and Libya.
I had better be candid with the House. If a person has been to a country where a visit might be considered to be controversial, he is wise to make clear to his colleagues the basis upon which he went. I personally paid the £375 air fare to Oman and the £300 that I gave for his organisation, Friendship Across Frontiers, to Riad-El-Taher, a British national of Iraqi origin from Basra who lives in Esher. The £300 covered the 15-hour journey across the desert from Amman to Baghdad and various other things that were necessary during eight days in Iraq.
The Minister ought to be careful before rebuking me for going. The former Conservative Prime Minister, the right hon. Member for Old Bexley and Sidcup (Sir. E. Heath), to whom I reported in some detail, said that he fully approved of my having gone. The Foreign Secretary, who was kind enough to give me half an hour alone in his room, although he asked me a number of searching questions, as one might expect, and legitimately so, said, "Look, I am not criticising you for going." The Foreign Secretary personally made that quite clear. I thank the Leader of the House for declining to denounce me. On 24 May, I received a letter from the Prime Minister:
Dear Tam,
I understand you rang Alex Allen asking if you and George Galloway could see me following your visit to Iraq. I should have been very interested to hear what you had to say but I am afraid my diary for the next few days is already over-committed. I know you are meeting Douglas Hurd later in the week and I will ask him to let me


know what you tell him. If, having seen him, you still think a meeting with me would be useful I would be happy to try and fit one in, I would have thought later on.
I am not threatening the Minister because I would not do such a thing, but, depending on what he says in reply to the debate and on any letter that he might write, I shall have to decide whether to accept the kind offer of the Prime Minister.
I did not let any of my colleagues, even my own Chief Whip, know that I was going because the trip would then have been about the British prisoners, which was not the object of the visit. I reported fully for four and a half hours in a debriefing at the excellent embassy in Amman. A great deal of information is available to the Department of Trade and Industry and the Foreign Office.
I say that British industry is disadvantaged because in the Al-Rashid hotel one could hardly get a meal early in the morning without tripping over representatives of Elf Aquitaine, Total, Japanese companies and many other business people wishing to re-establish relations with Iraq. I am sad that our manufacturing industry is likely to be disadvantaged not only now but in the future when the manufacturing industries and representatives of other countries supposedly party to sanctions are taking a very different view.
The French said that they are preparing plans simply for when sanctions are lifted. I hear that Paris is already pouring money into the development of the Majnoom field. It is open to question whether, technically, that is sanctions busting, but my first request is that the Department of Trade and Industry asks its representatives in Amman for their assessment of what other people are doing in relation to sanctions.
What do sanctions achieve? It is not part of this debate, although I would argue it elsewhere, but they are strengthening the position of Saddam Hussein. Sanctions are having the reverse effect from what was intended, apart from being immoral in relation to Iraqi children, the vulnerable and the elderly. Secondly, they are damaging British manufacturing industry. Before 1990, Iraq was one of the United Kingdom's biggest and best markets, partly because many of the Iraqis who were in a position to order were graduates of our universities.
At one point, my hon. Friend the Member for Glasgow, Hillhead (Mr. Galloway) looked around a room containing some 16 people and said, "It is quite clear that I am the only person in this room who is not a graduate of a British university." Our host was a photochemist trained at the University of East Anglia. Graduates came from Manchester university, the University of Manchester Institute of Science and Technology, Leeds, Strathclyde, Bath, Newcastle, Southampton and the London school of oriental studies.
I travelled back from the Shi'ite shrines at Karbala with someone who had been taught at the UMIST of Vivian Bowden and Colin Adamson, professor of electronics, and himself an electronic engineer. He said: "It is all so sad. You have invested as a country more than anybody else in Iraqi graduates. You are not getting the benefit of your investment."
Sanctions have hitherto been all pervasive. For example, there is no carbon for passport forms. There is no lead for pencils, which are not allowed to be imported. If anybody thinks that one went on a jolly, I can say only that

in sweltering Basra and Baghad one did not swim simply because there was no chlorine. Chlorine is forbidden as an import.
In pursuing sanctions, it seems that we are going for the windpipe of a society, but, in spite of events, some graduates are still full of potential good will. They point out that they would like to do Britain a favour because Iraqis speak English but not German or Japanese. They have received a training and want to order items that are familiar. Soon the situation will become so bitter that the process will be irreversible.
Let me put it this way; what is a 10 to 15-year-old who sees his brother or sister dying for want of pharmacological products readily available from traditional manufacturers in Britain to think for the rest of his life? I do not want to be maudlin, but I visited two hospitals in which I saw babies expiring for want of medicines that could have been imported. I was shattered. I know that it is said that sanctions allow the importation of medicines, but I found the Foreign Secretary genuinely bewildered about that point.
My certainty is that there is a heck of a shortage of medicines, and large number of babies are dying. I saw it with my own eyes, as did my hon. Friend the Member for Hillhead and the one journalist whom we took with us, Tim Llewellyn who, for nearly a quarter of a century, has been the veteran, hard-boiled middle east correspondent for the BBC. In such a situation, one would not be thinking about resolutions 706 or 712 or any other United Nations resolution if one were an Iraqi; one would have developed a gut resentment.
Anyone who believes that the regime of Saddam Hussein will be toppled by such a policy had better think again. People who were not Baathists but who were part of the biggest and most sophisticated middle class in the middle east are horrified at the propect of the breakdown of law and order which Saddam Hussein and his regime represent. They ask why the situation is allowed to continue. After all, by the winter of 1945 the Marshall plan was under way in Germany and yet we are putting the Iraquis through this.
I wish to raise specific issues. I hope that the Minister will ask into his office Peter Mayne, who, I understand, is the head of the sanctions unit in his Department. I want him to ask about a number of specific items. The first relates to sanctions and agriculture. The disruption caused by the embargo includes the lack of fertilisers, the inability to apply pesticides by aerial spraying, the lack of replacement parts for irrigation, harvesting and processing equipment, the displacement of populations, including migrant workers. The war caused damage to power stations, the disruption of transportation and a reduction in the crops harvest to an estimated 25 to 30 per cent. of the previous year.
An additional problem has been caused by damage to irrigation equipment. Although the extensive rivers system provides an abundant water source for irrigation, the soil salinity is high in the south, requiring proper irrigation and soil drainage practices which are essential to the maintenance of soil facility. Fluctuations in electricity supplies caused by wartime damage to power plants and a lack of spare parts have destroyed many electrically driven irrigation pumps in southern Iraq. While travelling on the road from Kut to Basra, my hon. Friend for Hillhead and I saw that with our own eyes.
Iraq's animal production sector has also been seriously affected by economic sanctions. Veterinary services have been paralysed due to the lack of medicine, laboratory materials and vaccines. Outbreaks of vaccine-preventable rinderpest have plagued herds. We saw some of that. My first question concerns sanctions in agriculture. Will the Department of Trade and Industry have a discussion with Peter Mayne and his colleagues about the effect of those sanctions and whether that effect is part of the purpose of UN policies?
My second question concerns sanctions on arms. The Iraqis put it this way: "The west is in the position of a drug pusher. Do you suggest that you now think that we should have refused to buy the arms that you were so enthusiastically trying to sell us?" The truth is that we, the Americans, the Chileans, the French and the Germans sold Saddam Hussein the wherewithal for mass destruction and then blamed the Iraqis for buying the arms.
I have spent a morning at the Scott inquiry. Undoubtedly, Sir Richard Scott and his colleagues will come to some conclusions. Many of us knew perfectly well that the arms sales were taking place. We acquiesced because we did not want the Iraqis to be defeated by the mullahs, by Ayatollah Khomeini and by militant Iran. The whole circumstances of the beginning of the conflict were complicated.
As Tariq Aziz put it to us in an interview that was supposed to last for half an hour, but which went on at his request for one hour and 50 minutes, "You dined us and we dined you, and then you could not talk to us properly." I am not suggesting, for heaven's sake, that we sell the Iraqis arms. However, the arms issue should not exclude other considerations.
My third question concerns the operation of sanctions and health. I need not repeat the questions in relation to Glaxo about which I want the Minister to talk to his advisers. However, I ask specifically about insulin. I was told by one of my hosts that his 10-year-old daughter had diabetes. He spends his time not in the Iraqi Foreign Office, but scraping around trying to find insulin. At 600 dinars an injection, the cost is crippling. The Iraqis do not have scanners, and syringes have to be used two or three times. As one who comes from the Edinburgh area, I know that if one uses syringes more than once or twice, one expects AIDs to spread, for God's sake. AIDs is now developing in the river valleys—it is a very taboo subject in the Arab world—in a way that never happened before. Disease knows no frontiers. Malaria, which had been eradicated, has been re-established. Paratyphoid is back, kwashiorkor is up 29 times and marasmus is up 24 times. One could go on and on with the statistics produced by the Canadian doctor Eric Hoskins and others.
The sanctions committee, in which the lead Department is the DTI, must consider whether it should really ban radio isotopes for diagnostic equipment, whether it should ban ammonium nitrate and nitrous oxide, which are used in caesarian operations, and whether it should ban anaesthetics. If we do so, we create a major health problem. Almost 100,000 children more than the expected number have died since the beginning of the Gulf war. The post-war death rate is estimated at triple the pre-war rate. Many of the child deaths were due to diarrhoeal disease caused by contaminated water supplies. There has been a resurgence of vaccine-preventable diseases, including polio, diphtheria and measles. Water and sanitation

services are absolutely critical. War damage and breakdowns go largely unrepaired because of a lack of vital spare parts and of technological input. The Minister ought to ask the sanctions committee about spare parts, hundreds of millions of dollars-worth of which are required to restore water quality and quantity to their pre-war levels. Sewage is dumped untreated into all major rivers—the source of drinking water. Seeing the pollution of those two great rivers, the Tigris and Euphrates, one can only say, "My God!" We saw towns flooded with raw sewage, increasing health hazards. Environmental damage is severe. I had a briefing from the wife of the director of Kew, but I hardly dared ask about environmental damage for fear that I would get the answer, "You are concerned about birds and animals. What about human beings?" It became so embarrassing that I did not pursue the matter.
The sanctions committee must consider that matter and —for all the United Nations resolutions the fact that on 20 November 1989 the United Nations general assembly adopted the convention on the rights of the child, article 38 of which states:
In accordance with their obligations under international humanitarian law to protect the civilian population in armed conflicts, States Parties shall take all feasible measures to ensure the protection and care of children who are affected by an armed conflict.
My friend Tim Llewellyn and I talked at length to representatives of the United Nations Childrens Fund, who told us, "We have combative inoculations throughout the world, yet in Iraq, we are encouraging the conditions that create cholera. There are now no inoculations against rabies." Is that really the intention of the United Nations body? I cannot believe that it is.
I come to the question of sanctions and the meat-processing industries. A lot of people who could be called relatively well off—let alone poorer people—have not had meat for three months. The Abu Ghurib milk factory was destroyed and that has had an effect on nursing mothers.
We are creating a generation who will grow up absolutely hating the west. Quite apart from anything else, Iraq has the second largest—and, in future, arguably the largest—oil reserves in the world. To put the matter at its basest—frankly I care more at the moment about the humanitarian issues—we must ask ourselves how our behaviour will help British industry in future.
It would be improper to deploy the political case against sanctions, except by saying—the Foreign Secretary listened carefully and said that he would consider my point —that, if the reason for sanctions is the so-called suppression of the marsh Arabs, the Government should perhaps think again. My hon. Friend the Member for Hillhead and I visited both villages to which we were taken and villages where we were completely unexpected, to which we insisted on going and I can say that I do not believe that such suppression is taking place. I cannot talk about the Kurds, although the Iraqi Foreign Minister said, "There is a Kurdish problem in the north." The impressive Health Minister, Dr. Mubarrak, is himself a Kurdish doctor and, when we were asked to address the Iraqi Parliament we met quite a number of authentic Kurdish representatives. What I am saying is that the whole basis for sanctions is open to considerable question.
What of sanctions and pollution? One sees black smoke belching from the refineries that have been put back together, but there are no separation chemicals for the


separation of gas and oil that is necessary. Pollution is leading to a dramatic increase in the abortion rate and in the number of malformed foetuses. In particular, I ask the Minister to relent on the question of the export of nylon thread, which is one of the materials that are really necessary if some kind of anti-pollution measures are to be implemented.
We must also consider the question of sanctions and power cuts. Sanctions have played a direct role in perpetuating low coverage rates and hence in encouraging outbreaks of vaccine-preventable diseases. Freezers, generators and other cold chain equipment damaged or destroyed during the Gulf crisis have, in many cases, still not been replaced or repaired due to restrictions on the import of supplies and equipment.
The ban on commercial air traffic has made the safe and timely delivery of vaccines difficult. Most vaccines and vaccination supplies are brought by truck along the 1,000 km Amman-Baghdad road which potentially affects their shelf life and potency. As I have twice covered that road there and back, I can easily imagine how exceedingly difficult that all is.
Recent vaccination campaigns have reduced the risks of full-scale epidemics, but the expanded programme of immunisation has been weakened due to the war and sanctions and will require considerable material input before it can regain its pre-war status and capacity.
Let me be clear about this. I am not asking for British taxpayers' money. I am asking for a decision to unfreeze assets that are here. Considerable Iraqi-owned assets could be unfrozen. This is not Somalia or one of the many countries in which there are parlous situations and where there is no money. There is money to be had in respect of Iraq. It is a matter of governmental decisions on the unfreezing of assets. It is not a matter of simply trying to ask for more and more from the overseas aid fund.
We must also consider the issue of sanctions and tyres. One sees bald tyres throughout the area and they make transport dangerous. Above all, there is a need for water purification equipment. Chlorine, pumps, motors, control panels, chlorinators, steel collars and pipes, laboratory equipment and various kinds of chemical agents are required.
British industry would be more than willing to supply those items. It has been more than willing to supply some of the learned journals of which Iraqi doctors say that they are starved. It is very difficult for people who have been brought up with sophisticated equipment to find, once they are deprived of that sophisticated equipment, that they must diagnose in an old-fashioned way which they are not used to.
It may be said that all those problems could be solved if Iraq were to accede to certain United Nations terms. Bluntly, having been to the country, I know that no Iraqi Government of any kind, let alone the present regime, could accede to United Nations terms which give the total priority to recompensing Kuwait. As the Iraqis put it, "What is the choice? Dying Iraqi children or fat Kuwaitis?"
Iraq is an ingenious country. The Iraqis repaired the faxes and telexes in southern Iraq and Basra quicker than the Americans did for the Kuwaitis. Perhaps the west does not like the idea of Iraq being a modern nation. Iraq was

a modern nation in 1990. If we believe that we will be able to resolve the situation by bypassing the Iraqi Establishment, we must think again.
In respect of Iraq, I conclude with a simple thought. The supply and marketing of much of the world's oil in 20 years' time will be run by the children of those who are suffering as a result of the sanctions now. It is felt more and more that sanctions are being oriented, as the Iraqis put it, "to kill our children." I have a constructive suggestion, and it is the one that was foremost in a two-hour meeting—again, scheduled for half an hour—with the very able Iraqi Foreign Minister. Please do not think for a moment that those who serve Saddam Hussein are thugs or men of little ability. On every occasion, the people whom we met were impressive. That is not only my judgment, it is the judgment of Tim Llewellyn and of Riad El Taher. Indeed, it is the judgment of my hon. Friend the Member for Hillhead.
The Iraqi Foreign Minister asked us to sit down at a diplomatic and trade level and go through point by point ways in which sanctions at least could be alleviated. It would greatly be to the long-term advantage of British industry if that were done.
The hon. Member for Bedfordshire, South-West (Mr. Madel) mentioned Libya. For time reasons, I shall not pursue the point, other than to say that the Libyans believe that more than 800 of their citizens have died because of a United Nations air embargo which was imposed because of the 1988 Lockerbie bombing. It has not been possible, they argue, to send abroad 5,445 critically ill patients—that is, cardiac patients, kidney transplant patients, and patients requiring brain surgery—who would formerly have been transported by air ambulance.
Not only are there the arguments in relation to the motor industry, which were mentioned by the hon. Gentleman, but I will take lessons from nobody on the horror of Lockerbie. I went there. It was cleared up by police from my area. It was the biggest crime against civilians in the western world since 1945. However, the idea that those two accused Libyans sat down in a cafe and said, "What shall we do? Shall we commit that awful crime just by ourselves?" is absolutely preposterous. As Kate Adie put it to me—she had met them—they were footmen. The truth is that that crime was dreamed, up in Tehran, in vengeance for the shooting down of the Iranian airliner by the USS Vincennes. Much of the matter was executed where they had the celebratory party in Damascus, and it looks like scapegoating the Libyans—taking it out on them.
The Government should talk to Dick Morris, the former chairman of Nirex, who is particularly involved in Brown and Root, and other engineering concerns that were doing some business with Libya. British industry would do a great deal more if there were a re-look at the political situation, and this is the time to do it.
For time reasons, I will leave it at that, but I make one plea: look at the sanctions unit and its work in depth in relation to Iraq and reconsider the Libyan situation.

Mr. Mark Robinson: It is always interesting to listen to the hon. Member for Linlithgow (Mr. Dalyell). I hope that you will not mind too much, Mr. Deputy Speaker, if we move away from


such exotic rivers as the Tigris and the Euphrates and come closer to home and the River Frome, and the narrow focus of the debate.
I congratulate my hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) on the wide-ranging way in which he launched our debate. He touched on many issues that are close to my heart, and I shall relate some of those issues right down to the local level.
I should not have been surprised by the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins). It would be nice just occasionally to hear some rather more constructive opposition. Opposition Members always accentuate the negative. Conservative Members are often accused of harking back to 1979 and to what we inherited then. I should like to hark back to 1974–79, when something called constructive opposition existed. The Opposition would learn a lot, particularly in respect of industrial matters, if they started to balance constructive criticism with some of the good things that are happening to our industry, our economy and our companies close to the ground.
I have the good fortune to represent a constituency with an exceptionally broad-based economy, which includes manufacturing. It is a rural constituency; in the public mind, manufacturing is often associated with large companies and large employers, but that is only one part of the picture. Many small businesses in this country are producing, for the home market and for export.
Somerset has large interests in hi-tech industries, many of which are related, directly or indirectly, to the defence sector. It is worth pointing out that the sheer variety of commercial activity in my constituency and throughout the south-west has left that region especially vulnerable to the sort of far-reaching recession through which we have just passed. I believe, however, that this width of experience and expertise will provide the opportunity for the south-west to bounce back and take full advantage of the economic opportunities that lie before us.
I can understand and sympathise with constituents who have been hard hit by the recession when they approach me and claim that they have seen little or no evidence of the much-touted recovery. I have been careful to avoid issuing advanced green shoots statements, as my experience in banking tells me that it will take time for the optimistic statistics compiled and released by institutions in London or Bristol to come through as hard evidence in boardrooms, pay packets or the high streets of towns and villages.
Still, we have every right, after the gloom and doom of the past three years, to expect a return to confidence—it has started to happen. Now is the time to voice the basis of our optimism. As the Prime Minister has said, it is time for the pessimists to stand aside. The Opposition parties have been content to talk down hopes of recovery; that has become the ingrained attitude of the official Opposition. So it is up to Conservatives to speak up for Britain and ensure that the recovery gathers pace.
DTI figures and those released by the CBI prove that business optimism is returning. More than 70 per cent. of businesses in the south-west forecast that sales growth over the next three years will lead to increased productivity. Most importantly, perhaps, the latest CBI regional trends survey has shown that more manufacturing firms in the south-west than in any period since August 1990 report that capital expenditure on plant and machinery will rise over the next 12 months.
Investments in products and process innovation and in training and retraining is forecast to perform at a similar rate. In fact, expectations of capital authorisations are more buoyant in the south-west than in any other area except East Anglia. For a region in which manufacturing accounts for 21·1 per cent. of GDP and 19 per cent. of total employment, this planning is a critical factor in the south-west's recovery prospects.
Companies are taking advantage of low interest rates and inflation rates—but a word of caution must be sounded. I feel sure that hon. Members on both sides of the House have been approached by business men asking for a sustained period of stability in monetary policy. Industry relies as much as agriculture does on that ubiquitous phrase, "a level playing field". Only that will secure healthy levels of investment in the long term, which is why the success of the European single market, launched this year, is so crucial.
The same principle applies to companies that are taking advantage of our competitive position to trade their way out of recession by increasing exports of manufactured goods. The devaluation of the pound has helped to top up company export order books at a crucial time. As the CBI has pointed out, the situation has recently become more difficult on the continent, where some of our main trading partners are entering recession and where some have followed so-called perfidious Albion and devalued their own currencies to achieve a more realistic and competitive exchange rate. Nevertheless, manufacturing companies in my constituency are adopting a hungrier attitude to potential global exports, and that should compensate for the restrictions in our European markets.
I pay tribute to my right hon. Friend the President of the Board of Trade. The DTI has recently grown in stature and provides more practical help and advice than ever before for manufacturers who wish to expand their sales horizons. The Department also leads high-profile and extremely successful trade delegations abroad. I am sure that that is one of the ways forward and will help us to meet the CBI prediction of an increase in exports this year of 4·7 per cent., rising to 5·5 per cent. in 1994.
Achieving such dramatic results has undoubtedly been helped by Government measures since the autumn to provide an additional £2 billion of help for businesses looking to foreign markets. Paul Lewis,' the export sales manager of Cuprinol, a manufacturer of wood stains and varnishes in my constituency, summed up the new attitude when he said:
There seems to be a reawakening of the need to take up our traditional role as a trading nation.
That company's exports have increased by 30 per cent. over the same period last year. New markets are being exploited in the far and middle east and in Africa, the Caribbean and Europe, and the company is currently exporting more than at any time in its 60-year history.
I am sure that my hon. Friend the Minister will confirm that that success story is not unique. For the sake of the economy, manufacturing companies such as Cuprinol must be given every incentive and encouragement to continue their efforts.
As I have said, the defence industry plays a vital role in the manufacturing economy of the south-west where a significant proportion of the working population is employed by companies such as Westland helicopters in Yeovil and GEC-Marconi at Templecombe. The latter recently announced 90 redundancies and since 1992 the


work force has fallen by nearly 50 per cent. Those depressing figures have resulted from the curtailment of defence expenditure and from the normal process of rationalisation that many companies have had to undergo.
The full impact of those decisions has been felt across a wide range of sectors from mechanical, electrical and electronic engineering companies that are traditionally associated with defence, to other manufacturers such as textiles, clothing, construction and property.
The latest CBI survey for the south-west highlights the potential extent of the knock-on effect. Some 51 per cent. of companies receive some orders destined for the defence sector, even if they are not directly involved in the defence industries. However, companies involved directly or indirectly in the defence sector are reacting positively to changing circumstances. In the defence supply chain, 60 per cent. of companies have been actively developing new markets as their primary response to defence cuts.
In common with other long-established companies, Westland has radically changed its management system and is vigorously pursuing sales abroad for the EH101 helicopter which is manufactured in concert with Augusta. Fifty of those have been ordered by Canada and it is hoped that 16 will be ordered by Italy later this year. The utility order for 25 aircraft for the RAF, which has been outstanding since 1987, should be confirmed. I have made representations to that effect to my hon. Friend the Minister of State for Defence Procurement. This is an advanced multi-capability aircraft developed by a company which is making great advances in management philosophy and techniques in the face of a significant contraction of its traditional domestic markets.
Similarly, GEC-Marconi has won about £62 million worth of home orders this year and has earned £3 million from overseas where prospects for future orders look good, especially for mine-hunting requirements in Korea, Turkey, Spain and Australia. The company has responded to the challenges presented by the sharply constricted marketplace by securing a dominant position in submarine sonar technology. GEC-Marconi is currently seeking to secure the Royal Navy contract for the Trafalgar-class refit with its 2076 sonar system. Success in those projects is vital to the company's development. That is just one aspect of the changes in manufacturing industry, related to the defence sector in the south-west, which require special emphasis.
As the potential marketplace contracts, companies with a highly skilled work force are rightly looking to diversify their operations and to explore new markets where their expertise could prove useful. A recent survey shows that 13 per cent. of companies in the defence sector are actively seeking help in technology conversion. It might be useful to mention a company based in the village of Beckington in my constituency. Systems Engineering and Assessment Ltd. has been using its specialist knowledge and in-depth technical skills in signal and image processing systems, which previously related wholly to the defence industry, to pursue several new markets including space and environmental remote sensing systems and medical ultrasound image processing systems. At the same time, the company is actively looking for niche defence markets.
Despite the difficult conditions of the past four years, that fascinating young and dynamic company has achieved an average growth of 30 per cent. per annum.
The message is clear—market leaders such as Westland and Marconi must be given every chance to prove the worth of their products at home and every encouragement to help them find new markets abroad.

Mr. Cousins: I am interested in the information the hon. Gentleman is giving about the defence industry in his constituency and region. He is no doubt aware that the Department of Trade and Industry aviation committee prepared a defence aerospace technology acqusition plan to secure the future of some of the industries, companies and plants that the hon. Gentleman mentioned. It submitted that plan to the DTI last December, but is still waiting for a reply. Perhaps the hon. Gentleman shares my regret about that and also the feeling that that casts doubt on the Government's serious commitment to the future of those industries.

Mr. Robinson: We would all wish to encourage the Government, the Department of Trade and Industry and the Ministry of Defence to speed up their decision-making processes. That is vital to the ability of companies such as Westland and Marconi to plan their future business. There are lessons to be learnt.
The EH101 helicopter is a first-class product, developed in Britain and Italy, which is way ahead—by eight, nine or 10 years—of any other helicopter of that type and generation. We must have the capacity to go out and sell it. After all, the defence era is no longer one of moving massive armies around the world. As was evident from the private notice question this morning, we need to be able to provide a flexible response as situations evolve, often hour-by-hour or week-by-week.
Over the past three years, the south-west has suffered from an especially large increase in the failure of the previously buoyant small business sector. That has been the most noticeable effect of the recession on my constituency and the south-west generally. However, both the private and public sectors are showing that Somerset still has a great deal to offer to the potential advantage of both local firms and those wishing to relocate to Somerset from outside the county.
An excellent example is provided by Pellextra Ltd., a private development firm which took over the site of a disused tannery at Milborne Port in my constituency. Since 1990, Pellextra has used short, flexible leases in the conversion of the original buildings to attract a wide variety of small businesses, some of which are directly related to large manufacturing companies in the custom that they receive. The site now employs more than 120 people. Examples of new jobs being created—which may come as a surprise to the hon. Member for Newcastle upon Tyne, Central—are apparent all the time. It is a pity that the hon. Member for Newcastle upon Tyne, Central did not mention that when he spoke about job losses. Such an initiative is vital in a rural area with high unemployment. Some estate agents and surveyors tend to turn up their noses at the potential for development in areas that at first glance seem cut off from mainstream centres of urban business activity. The success of companies such as Pellextra demonstrates that that attitude is outdated and misguided.
Rural areas can provide a labour market, good communications and quality of life. Small businesses have every chance of thriving in rural areas, and that will prove vital in the economic recovery of many parts of my constituency, the south-west and the whole country. Small businesses throughout Somerset have also benefited considerably from the positive work of various enterprise organisations, whose activities I shall briefly explain and commend.
Somerset county council has sought to improve communications and to encourage the relocation of manufacturing firms to the area. It is serving an umbrella role for the Somerset training and enterprise council, which has helped to transform the county's enterprise agencies into five district centres from which local businesses can obtain a wide range of advice, and which provides vital services such as business reviews and improvements projects, training and general development assistance.
One district centre is based in Frome—a major town in my constituency which has suffered particularly severely over the past three years, with unemployment currently running at 13 per cent.—4 per cent. above the county average. The recently reconstituted Mendip district enterprise centre can play a pivotal role in the town's regeneration. The new chief executive recognises the need for the provision of a network of business information. He decided to establish a business club to act as a catalyst and focal point for local manufacturers and businesses, where they can exchange information. Although it applied to be part of the one-stop shop initiative, it was not successful at the first attempt. I hope that its work will make it eligible for the initiative when it expands, as I know it will. I hope that my hon. Friend the Minister will take that into account.
The desire for a local business forum was recently proved by the response to a questionnaire sent by that organisation to 600 companies—77 of which replied in the first week. Mendip district council works closely with the enterprise centre, and I am glad that Frome should benefit from the council's plans to continue work on establishing a new industrial site between the existing Marston trading estate and Wessex fields on the edge of the town.
The council is attempting to have the land serviced by a new estate road, which it is hoped will be jointly funded by the private sector and local authorities. Partnership funding must be seen as the way forward, and awareness of that among councils and local enterprise organisations is warmly to be welcomed.
A subject of particular interest and concern to me for some time is over-regulation and red tape, which are harming manufacturing and businesses in the south-west and throughout the country. Earlier this year, I attended a radio interview armed with a pile of documentary evidence of unnecessary rules and regulations supplied by a major employer in my constituency, Butler and Tanner, which is a printing company. I have since been beseeched by numerous firms to consider the regulatory burden with which they are forced, often unnecessarily, to contend.
Recently, I visited Wincanton Ltd., a distribution company which has expanded by an average 11 per cent. over the past few years and now has an annual turnover of £200 million. The company has achieved that success, despite suffering a constant supply of new rules emanating from not just Brussels but frequently from Whitehall—covering everything from health and safety to food

hygiene. As the sales director told me, the increased costs that the regulatory burdens entail filter directly to the customer. If companies such as Wincanton Ltd. that consistently do well are suffering from this phenomenon, how much more onerous and costly are such regulations proving to be to those companies that have found recent times much harder?
There is no mechanism in place at present whereby regulations can be subjected to procedural review. Some of the legislation is pre-war and has become bottled up in the system. I was delighted when my right hon. Friend the Prime Minister expressed his determination to tackle the problem. The Department of Trade and Industry is examining more than 3,500 rules to see whether they are still necessary.
I should be delighted to support a Bill aimed at not only jettisoning unnecessary and old regulations but subjecting all new regulations to an automatic system whereby they are scrutinised regularly, either to be retained or abandoned. Such a Bill would gain the overwhelming support of local business men in the manufacturing sector and must incorporate, as I told my hon. Friend the Member for Canterbury (Mr. Brazier), the need for cost compliance to be taken into account in any proposed regulation. Any proposed regulation should be costed so that its impact on the costs of the businesses at which it is aimed can be directly assessed to get a balance between what is necessary and what are the legitimate concerns of those businesses in an age of increased competitiveness. After all, one way to bring unemployment down is to increase efficiency and competitiveness and go out and win markets against competition from others overseas.
I have covered a broad range of issues and concentrated on the evidence of those companies and organisations in my constituency that are showing the way forward. The economic problems that I have illustrated are not unique. As I said, the south-west region has suffered considerably over the past three years. Nevertheless, there is a heartening atmosphere of urgency about the attempt to find solutions, especially in Frome.
My roots lie in Somerset. Sadly, I have witnessed the suffering caused by the recession. However, I have every confidence that I am starting to witness the rebound. The evidence is there. In that context, I am especially looking forward, on Monday, to laying the foundation stone of a new company that has decided to locate in Frome. As my hon. Friend the Minister knows, that is not an exception. There are examples of new businesses, new companies, new developments and new expansions up and down the country. If we want to encourage the confidence of not only business men in the United Kingdom but people overseas who are looking for British products, we must start talking up ourselves and our businesses and get out of the cycle of pessimism into which we have so readily sunk recently. There is a spring in the air and future success will be the greatest tribute to the courage and tenacity of local business men.

Mr. A. J. Beith: The hon. Member for Somerton and Frome (Mr. Robinson) spoke constructively and frankly, and contained in his remarks, inevitably, was a recognition of how business in the area that he represents has been hit hard in the depths of recession. There was also welcome support for the work in


which local authorities are engaged, including Liberal Democrat local authorities in the area, and for the spirit of councillors co-operating to do what is best for their area. That is the right spirit of this debate. The depth of the recession and the work of my political colleagues in the area must be contributing to what for him is a worryingly mounting pile of Liberal Democrat votes in the constituency of Somerton and Frome. The recent elections were, of course, a source of great encouragement to us.
The subject of today's debate is improved productivity in United Kingdom manufacturing. It undoubtedly improved during the 1980s. However, it still remains below that of most, if not all, of our main competitors. That shows just how big the problem is. It has been pointed out several times during the debate that the principal factor in improved productivity figures is the lower level of employment in manufacturing industry. There has been a reduction from 7·1 million people employed in manufacturing in 1979 to 4·5 million now. The number of jobs that manufacturing supports has massively decreased, so productivity must inevitably have risen.
The downside relates to the problems for the rest of the economy, which has to cope with the very large number of people without jobs. That is part of the problem which the Government now confront. It is part of the background to all the arguments about potential cuts in public services and to all the problems surrounding the public sector deficit. We have to generate activity in manufacturing and other areas to take up the slack in employment that was created during that extremely worrying period.
When we refer to increases in productivity, Ministers should bear in mind those industries where the productivity increases that were achieved were very hard won, but where disaster now strikes. I refer to three industries where disaster is bound up with Government policy: British Coal, Swan Hunter and the former British Rail Engineering Ltd., now the ABB works at York and Crewe. In all three instances, there have been significant increases in productivity and dramatic changes in labour flexibility. Productivity improvements can be demonstrated, but in every case disaster now faces those who, by their own efforts, achieved productivity increases.
The Minister knows, because of his previous departmental responsibilities, Ellington colliery in my constituency where there have been tremendous improvements in productivity. In other pits, too, there have been dramatic productivity improvements, but the coal review amounted to an appalling disaster for the coal industry and for several pits where significant productivity increases had been achieved.
Those problems have in part been caused by Government policy: for example, the featherbedding of nuclear power and the unfair market position in which coal has been placed. As for Swan Hunter, the absence of a clear and constructive policy to ensure that we have a reasonable diversity of shipbuilding capacity—indeed, any shipbuilding capacity at all—is at the root of the problem. Tremendous productivity improvements were achieved by Swan Hunter and labour flexibility improved enormously. In the past, rigid demarcation lines militated against productivity. Although those demarcation lines were

swept away and although tremendous changes in working practices were made, the men who achieved those productivity increases now face disaster.
As for orders for the railway engineering workshops, even though productivity of the industry has improved, anxieties over railway privatisation have led to orders for rolling stock not being placed.
The rise in productivity due to changed labour practices owes something to the changes in the law. We support a number of those changes. We argued for some of them when they were still opposed by the Conservative party. I remember voting for postal ballots in trade union elections and for strike ballots when we were encountering the opposition of both the Conservative and Labour parties. I also recall arguing for the abolition of the closed shop when the Conservative Government were still sending their Solicitor-General to Strasbourg to argue that British Rail was entitled to have and should be allowed to keep its closed shop policy.
Much has changed in the intervening years. It is now generally recognised that a number of key changes in industrial relations law were necessary. Those changes have led to greater labour flexibility. The danger, however, is that we shall go overboard and will end up with basic trade union rights being threatened, an issue to which the Government must give some thought. The changes were necessary to achieve greater labour flexibility, but that flexibility can be affected by all sorts of things.
Another example of an area in which the Government need to be careful is relocation expenses, which will shortly be debated by the Committee considering the Finance Bill. The Minister must keep an eye on it, because, although the matter is dealt with by the Treasury, it is very much a matter for concern at the Department of Trade and Industry. One way in which companies achieve labour flexibility is by requiring or encouraging people to move to where they are needed. In order to do that, companies must contribute to relocation expenses, which are considerable and have been more difficult to cope with at a time when the housing market has been in a bad state. People who are trying to sell a house to move to another area as part of their employment will be in particular difficulty if the Government insist on limiting the ability of a company to meet relocation expenses. If the Government insist on making relocation expenses taxable over £8,000, many skilled workers, middle managers and technical and professional workers will not be able to make the sort of move that is necessary for company flexibility. The Department of Trade and Industry must get involved in discussions with the Treasury, because it is an important issue.
I would not ask for an open-ended arrangement to continue, but companies must be allowed to make reasonable provision for their workers who cannot afford to move. If workers cannot sell their houses for a long period, they must meet accommodation and other costs. The issue was not correctly dealt with in the Budget and the Government must modify it.
The Government can claim some credit for the part of the improvement in productivity which results from greater labour flexibility, but they must also look at areas where productivity can be increased by means that do not involve the loss of jobs. It is a mistake to view productivity simply in terms of what can be achieved by reducing the labour force.
The Government need to show that they can improve their policies on training, the support of research and development and transport infrastructure. Despite the significant improvements in company-based training, we still have an under-skilled work force and such gaps in skills are costing industry much money.
The Government must recognise that great improvements will not be made to our education until they try to carry the confidence and support of those who deliver education—teachers—and of those who are involved in supporting teachers—parents. It is not good enough for the Secretary of State for Education and Ministers acting in support of him to attack teachers' boycotting of tests when he has so manifestly failed to win the confidence of teachers for necessary changes.
That confidence has been fatally damaged by way in which changes have been made. In his opening remarks. the Minister referred specifically to technology in schools. Anyone who has been involved in the teaching of technology knows what a grotesque mess was made of the introduction of technology in the national curriculum. It was hopelessly mismanaged, which is recognised by the fact that substantial changes have been made to the original curriculum proposals for technology. The initial steps for the inclusion of technology in the curriculum involved such a drastic departure from practical skills that the machinery and equipment that had been installed in schools was going to be useless because so much of the effort was going to be switched to theoretical and design work of a pretty vague nature. Encouraging the interest of young people in basic practical and technical skills was rapidly disappearing from the curriculum as a direct consequence of what was done.
Thankfully, changes have been made, but the way in which the original changes were made was extremely unsettling, damaging and wasteful. The objective was right, but the steps taken to achieve it were extremely badly managed.
The Government will have to do much better in administering improvements in the education system and must make greater efforts to win the confidence of those most directly involved.
The hon. Member for Bedfordshire, South-West (Mr. Madel) referred to discretionary awards. In Northumberland, there are no longer any discretionary maintenance awards for a number of important and valuable training courses. Because of financial pressures and the way in which the grants were worked out, the local authority was unable to continue an important part of education provision. I agree that the Government should examine that matter.
I said that training was one way in which the Government could contribute to increased productivity. Another is clearly research and development, especially when directed towards innovation. All parts of industry ask that the Government should direct policy more clearly to the encouragement of research and development. I should be reluctant to have a tax or allowance system which, in a complicated way, tried to direct investment, but research and development is probably one area in which such provision could be made. Broadly speaking, I am not enthusiastic about specific allowances in the corporation tax system. I should prefer a lower rate of corporation tax, a stable tax regime and allowances

indexed to inflation so that business knows where it stands, hut research and development probably provides the strongest case of all for some form of fiscal incentive.
There is also more scope for the Government to consider the transfer of expenditure from defence research and development to civil research and development. Proportionately, most of the Government's research and development expenditure has been made by the Ministry of Defence. In view of the reductions in defence spending, we must move some of the effort into the civil sphere.
The Government can also improve productivity by means of the transport infrastructure. Industry knows full well how productivity is damaged by an inadequate transport infrastructure, including roads. However, I do not want to encourage the Government to direct investment into roads to such an extent that they lure on to the roads traffic that should be carried by rail.
Some of the greatest anxieties are caused by the railways. There is so much concern about the privatisation of the railways that it is hard to find anyone who believes that it will work. There is an investment gap in the railway system. A centrepiece of last year's autumn statement was the Jubilee line extension. We were told that it would be a significant boost to industry and to travel in the capital where business loses a great deal of money because of the difficulties of travel. That Jubilee line project is still not under way, so a significant part of the Government's claimed spending on transport infrastructure is not happening.
There are other gaps in the rail infrastructure, for example, on the west coast main line. Britain is in the ludicrous position of struggling to find a way of getting the trains from the channel tunnel to London in between the commuter trains while the French high-speed link is already in place. It would be a laughing matter if it were not so sad and frustrating for companies.
The Government's problem is that they believe that industry's competitiveness can be increased only by the control of labour and wage costs. Figures from the Organisation for Economic Co-operation and Development suggest that labour costs in Britain are already low by international standards. In addition, productivity is low. If wage and salary costs are only about one fifth of industry's costs, control of Wage costs alone will not help. Much has been done to control labour costs and the time has come to examine capital and transport costs, the quality of raw materials and the efficiency with which resources are managed. When a company has reached the limit in containing labour costs, it is time to start examining other problems and getting Government backing to deal with them. Long-term success will depend on tackling those problems.
We must also have regard to energy and resource inputs involved in industrial production. If we measure industrial success only by the reduction of labour costs and productivity per person employed, we shall fail to recognise the looming problem of our dependence on the use of finite resources and on pollution and damage to the environment, which we shall have to stop at some stage. Let us move quickly now to gain the competitive advantage of being ahead in the technology of better use of resources, the technology of energy efficiency and the technology of environmental improvement, where there are tremendous international opportunities.
One of the bodies that have contributed most valuably to our debate about industrial productivity is the Engineers Employers Federation, which has published a great deal of material on the subject. It says:
The future success of the whole United Kingdom economy depends crucially on shifting resources into investment in manufacturing industry, technology and infrastructure.
It continues:
The Government must make this shift of resources the prime objective.
It wants the Government to take a long-term view of the direction of industry and technology for 30 to 40 years and to to set their long-term policies accordingly.
Thirty to 40 years is a long way from the 36 hours to which the right hon. Member for Kingston upon Thames (Mr. Lamont), the former Chancellor, referred on Wednesday. Even before the right hon. Gentleman spoke, Ministers must have realised that short-termism is a constant criticism of the Government. It is also a criticism made of the financial institutions, as I shall outline later. The Government are always looking, at the very longest, to the next election—in the case of the present Government, to the day after tomorrow or the following morning's headlines. It is vital that the Department of Trade and Industry especially takes a long-term view and gears policies towards a long-term view.
The Engineering Employers Federation makes a similar point in relation to financial institutions. It says that financial institutions have a short-term outlook, that they seek unrealistically high investment returns and that there is constant pressure for dividend growth, which prevents United Kingdom industries from reinvesting as high a proportion of internally generated cash as is possible in foreign manufacturing industries.
That comment is also strongly made by small businesses and small business organisations. By and large, the bigger companies in Britain do not have a problem raising money or obtaining cash, but they face the problem that the financial institutions press for high dividend returns. Smaller business has a problem raising capital at all. It is locked too much into a system of raising capital on a short-term basis. It is bad for the health of the economy and small business that so much small business borrowing is on a short-term overdraft basis. It exposes small business to high short-term interest rates. It weakens the freedom of the Government to use short-term interest rates, as they have to do at crucial moments as an essential tool of monetary policy, and it inhibits the proper planning of a small business.
In both smaller and larger businesses it is important that we move towards a more stable long-term finance structure. The message for British financial institutions is that it would be much healthier if we saw them involved more in equity in business and if we saw them involved more in an understanding of the longer-term needs of a business. I should welcome the sight of more of the financial institutions on the boards of companies as non-executive directors. I should welcome the sense of commitment, which the German system seems to promote, of financial institutions to the long-term success of business. Some of the banks are beginning to recognise that the preponderance of short-term finance is not good

for them or for business. It proved not to be so in the worst years of the recession, when the banks got their fingers badly burnt.
I hope that in both Government and financial institutions we shall see a longer-term approach to the success of companies whose productivity cannot be furthered in the long term if there is immense pressure to produce quick dividends increases or immense pressure to respond to short-term Government policy changes. We need a change of outlook throughout the United Kingdom and throughout the governmental and financial system.
Productivity increases, as we have seen in manufacturing industry over recent years, are clearly welcome, but they are on the narrow base of reducing labour and labour costs. If we are to have sustained productivity improvement, we must have improvements in many other fields, including research and development, training and transport, and we must have a better financial structure within which business operates.

Mr. Gary Streeter: I am delighted to participate in the debate and to follow the right hon. Member for Berwick-upon-Tweed (Mr. Beith). I did not agree with much of his speech, but I know that, unlike the leader of his party, he is a man of principle.
Earlier this morning we witnessed one of the most unprincipled U-turns in parliamentary history. The right hon. Member for Yeovil (Mr. Ashdown) has spent the past nine months seeking out the cameras and calling for the Government to send our troops into Bosnia to engage in some kind of unrealistic military venture—our boys laying down their lives on the killing fields of Bosnia. Suddenly realising that that policy is unpopular, the right hon. Gentleman came to the House this morning bold as brass and called for our troops to be withdrawn. I am sure that the public will judge that outrageous and unprincipled about-face for themselves.
I am delighted to take part in this important debate about the impressive improvement in productivity in manufacturing industry in recent years. Manufacturing productivity has increased by more than 60 per cent. since 1979. Output per person rose by 5·1 per cent. in 1992. The first quarter of 1993 shows an increase in productivity of more than 7 per cent. Those are impressive increases by any standard, and far greater than those experienced by our competitors.
I want to focus on why those improvements in manufacturing productivity have taken place, on what is going right and on why the most recent figures are even better. Before doing that, however, let me emphasise why productivity is so vital. We are a trading nation. We buy and sell and we make and sell. That is what we do and what we have always done. Our future prosperity depends on the extent to which we can persuade customers, both domestic and overseas, to buy our goods. That is how we create wealth. That is why competitiveness is the key. Our companies must be able to compete on favourable terms with our competitors.
Being competitive means being ahead of the rest in three crucial areas—quality, availability and price. As many hon. Members will remember, British quality used to be a joke. We all remember Leyland cars in the 1960s and 1970s, put together by workers who had been transformed


into strike-happy clock-watchers by trade union oppression. Austin Allegros and Morris Marinas are still to be seen waiting for attention at the side of the motorway. That was Labour's Britain. Now Rover is outselling Mercedes in Germany. Is it not interesting to note that the Crown Prince of Japan chose to drive from his wedding not in a Honda but in a Rolls-Royce. British quality is once again becoming legendary throughout the world.
In addition to quality, availability is important. Customers do not want to wait for the goods. They want them now, and if they cannot have them now, they will buy them elsewhere.
If the quality is right and if a product is available, the price must be competitive. That is why productivity is crucial. Our unit costs must be equal to and, it is to be hoped, lower than those of our competitors. It is therefore extremely encouraging that manufacturing productivity is increasing so strongly in the United Kingdom. That will help us to compete, to export and to prosper.
There are two key reasons for the increase—the first is our economic climate. Among all the huffing and puffing from the Opposition, it is easy to lose sight of the fact that the economic framework in which business can prosper has probably never been better. We have low corporation tax, low interest rates, low inflation and a competitive pound. That is a framework not just for recovery but for long-term sustainable growth.
Earlier this week, I spoke to a leading industrialist in Plymouth—not, as some hon. Members may think, a contradiction in terms. I asked him, "What do you want the Government to do to help your business?" He replied, "You have already done it." "Steady as she goes," was the clear message. Manufacturing companies are now able to manufacture cheaply and export aggressively.
The competitive pound gives an opportunity to increase profits for investment or, more likely, to increase our market share abroad. Five million people work in our manufacturing industry which has never been in better shape. The hard work has been done. The blood, sweat and tears of many people and many businesses over the past few years, and the determination of the Government to get the economy right, have brought us to this new beginning: a unique opportunity to be competitive, to increase our market share, to create wealth and to begin a period of sustainable economic growth. Our productivity improvements are an important part of that.
The Labour party has shown itself again and again as having nothing to offer the nation. What happened to the campaign for recovery of the hon. Member for Dunfermline, East (Mr. Brown), which was relaunched on 9 November 1992? We have heard precious little about it since then. Perhaps that is because the hon. Gentleman admitted at the time:
We accept that our proposals will increase public spending, but I'm not prepared to put a figure on it.
Have Labour Members learnt nothing over all these years?
I once saw a very good musical in London called "The Hunting of the Snark". It was about a group of hapless adventurers who set off to try to locate a mythical beast called the Snark. It reminds me very much of the Labour shadow Cabinet in search of a credible economic policy. Labour Members do not have one, they do not know where to look for one, and they would not recognise one if it bit them on the leg—not, of course, unless John Edmonds told them what it was. We have nothing to fear from Labour.
The Liberal Democrats stand for a united states of Europe. They want to legalise drugs and brothels. That is an agenda which the patriotic, good and decent people of this country will not support. We have nothing to fear from the Liberal Democrats. It is time to recognise and build on our economic strength and to look forwards and not backwards.
In a debate on industry, it would be remiss of me not to mention Devonport dockyard. It is the engine room of the local economy of the far south-west. Even at this late stage in the decision-making process, I call on the Government to acknowledge that Devonport Management Ltd. has won the argument and should win the contract to refit and maintain the Trident boats.
The hon. Member for Dunfermline, East will meet my right hon. Friend the Prime Minister next week in a last-ditch effort to put in a word for Rosyth. He should be ignored. How different his words were in 1984 when he said that
the Trident programme … is unacceptably expensive, economically wasteful and militarily unsound."—[Official Report, 19 June 1984; Vol. 62, c. 188.]
How could any Government consider rewarding the hon. Member for Dunfermline, East if that was his view? If the Government had followed his misguided thinking, there would he no Trident submarines to maintain. I am sure that his views will now be ignored.
The second reason why manufacturing productivity is increasing so remarkably in this country is, of course, the industrial relations climate that we have put in place over the past 14 years. That is perhaps the greatest contributory factor in productivity increases. What a success story it has been. What tremendous advantages we have made in freeing manufacturing industry from the damaging, high-cost shackles of trade union domination which has blighted post-war Britain.
Those supply-side reforms have been the cornerstone on which productivity improvements have been built. I spent much of the 1980s advising employers around the country how to utilise the excellent Conservative legislation on industrial relations to free themselves of the dead hand of collective wage bargaining, stifling local agreements and restrictive working practices.
In many companies, I saw for myself the negative role of trade unionism, the intimidating tactics of shop stewards, the "us and them" mentality that was all-prevailing and trade union domination which brought inflexibility, a rigidity which was so damaging and a complete disregard of economic reality and of the company's financial position.
That was an expensive package that we simply could not afford. As a result, unit costs soared and productivity lagged. I have never been a great scholar of prehistory, but during the 1980s I saw dinosaurs led by dodos roaming at large in our midst, dragging our country down, plodding towards extinction. Much of that has been swept away in many companies throughout the land.
Now employers and employees talk to each other; they communicate and work together. Now people can be paid on merit and not because of a cumbersome collective bonus agreement. Now employees recognise the importance of productivity gains and beating their competitors. Now managers can devolve responsibility down the line to as low a level as possible. Now people can be genuinely flexible and multi-skilled and not locked into the past. Now people can take pride in their company, contribute


their own ideas and work for the prosperity of their company. Now there can be an end to "us and them" and an understanding of team work.
All those things have been made possible by Conservative trade union reform. It is no wonder our productivity is increasing faster than that of our competitors. British companies now have the freedom to compete. Our supply-side reforms are beginning to reap enormous benefits, but we must remain vigilant against any return to trade union power.
I was going to talk about the revolution in the delivery of training and the improvement in management techniques, but I will leave that for another occasion. Productivity is improving, enabling our companies to compete in European and world markets. Of course we have further to go to make up for the wasted years of socialism and trade union domination, but in the past 14 years we have made a tremendous start. We have in place a framework for success to create wealth, to compete across the globe, and to achieve prosperity and peace in a Conservative Britain.

Mr. Tony Banks: There is something distasteful about the way in which the hon. Member for Plymouth, Sutton (Mr. Streeter) and other Conservative Members constantly attack British trade unions and trade unionists and then lecture us about our links with the trade union movement of which we are rightly proud. At least those links are open, above-board and open to scrutiny by everyone. We are not like the Conservative party—funded by Greek and Hong Kong fascists and crooks both in this country and abroad, and refusing to publish our accounts. When the hon. Gentleman's party is as open about its links with some of the nastier elements of business in this country and abroad as we are with our links with the British trade union movement, democracy will be better served in this country.
It is not often that I find it incumbent on me to leap to the defence of the leader of the Liberal Democrats, but the hon. Member for Sutton attacked the right hon. Member for Yeovil (Mr. Ashdown) by saying that he had changed his position. He should have listened to what the leader of the Liberal Democrats said. He said that, in earlier days, he had urged that there should be intervention into the old Yugoslavia, but the situation had changed dramatically; the time had passed, and now it was time to consider withdrawal because circumstances had changed.
The hon. Gentleman's attack on the leader of the Liberal Democrats was in keeping with his attack on British trade unions. It was wrong, it was inaccurate and it entirely misrepresented both of them. That is the last time that I shall come to the defence of the leader of the Liberal Democrats.
I also listened carefully to the Minister. He said that we should stop talking about the decline in manufacturing industry and talk rather more about the excellence of our manufacturing. Clearly that indicates that the Government have learnt nothing from the disasters of the past. The economic illiteracy within the Government appals me. We heard much from the former Chancellor about short-termism. It actually extends to the Government's economic policy, but I suppose that one

should not be surprised by that, as the country is led by a Prime Minister who is a cross between Mr. Pastry and Eddie the Eagle.
I remember that when Lord Lawson in his former capacity used to say from the Dispatch Box—"Do not worry about manufacturing industry, we have service industry to rely on"—Conservative Members cheered him on. They must remember doing exactly that. A report from the House of Lords in 1985 made it clear that services are no substitute for manufacturing because they are heavily dependent on it and only 20 per cent. are tradeable overseas. That was the economic nostrum of the day. Conservative Members supported the idea that the service industries would rescue this country. They have not.
The key to Britain's economic future is manufacturing industry. It is a fact, as my hon. Friend the Member for Tooting (Mr. Cox) said, that between the Napoleonic wars and 1983 we always ran a balance of payments surplus in manufacturing goods. Since 1983, we have been in deficit —and the projected deficit for this year is one of about £17 billion. That is the reason for our economic failure.
Conservative Members must shed the scales from their eyes and recognise the extent of the economic problems facing us. While the deficit has been accumulating, the Government have had the enormous and wondrous benefit of the £140 billion from North sea oil, and the privatisation money. It has all been squandered while manufacturing industry has been allowed to wither.
If we continue on present trends and as North sea oil runs out, this country will be reduced to the status of a banana republic.
Output per head in manufacturing industry rose rapidly in the 1987–88 boom. It stopped rising in the early part of the recession and even became negative in the first half of 1991 —but rose by 4·7 per cent. in 1992, reaching an annual rate of increase of 5·8 per cent. in the last quarter".
That sounds good.
This improvement is useful but seems mainly to have been achieved by drastic cuts in staff, reducing employment even faster than the fall in output. Since the recession began the workforce has cut by 735,000, or 14·5 per cent., whereas output has fallen by about 7·5 per cent. How much better it would be if output had increased while employment had been at least maintained.
That is what The Economist had to say about productivity. Of course, productivity has been increased, but only at the expense of a reduction in the work force. It should have come about by an increase in investment.
The Opposition want high employment and high productivity in this country. The Minister repeatedly challenged us to accept that higher productivity was better than higher employment. We do not accept that. The two are not incompatible, and the Minister should recognise that. The key is capital investment. I do not have time to go through all the statistics, but OECD figures show that we are so far behind our main competitors in terms of capital formation that our productivity is not sustainable if the economy expands.
The truth is that Britain's manufacturing base is now too small to cope with the demands being made on it by the domestic economy. The number of manufacturing jobs has fallen from 7·1 million in 1979 to 4·5 million today —a crucial statistic. It is not just a ·question of industries changing. Our manufacturing cannot service the needs of our own economy, and that will be shown if and when we manage to achieve any growth.
The statistics really should be studied carefully by Conservative Members before, like Lord Lawson, they


claim that some sort of economic miracle has been under way. What is really disturbing about this recession is the fact that, in previous recessions, imports declined; but this time imports have increased, while domestic output has actually fallen. We cannot continue like that.
If there is to be any movement in the economy—I hope that there will be—the people whom I represent will be looking around for jobs. Opposition Members do not want the recession to go on—we have nothing to gain from its perpetuation. Our constituents are suffering. We want some growth in the economy, but we will not go in for stargazing of the type that Conservative Members indulge in.
Between 1979 and 1989, every major sector of British manufacturing suffered from an increase in imports as a percentage of total home demand. That happened in every sector apart from food, drink and tobacco where the proportion remained the same. The implications of that should rapidly become clear. They are that if there is movement in the economy there will be a further upsurge in import penetration, and that in itself will be inflationary.
The balance of payments deficit continues to get worse and that puts pressure on the pound. To defend it, even with free-floating exchange rates, the Government will have to raise interest rates and the whole depressing cycle will continue. None of the Government's past policies or what they intend to do in future will break that cycle.
The President of the Board of Trade made a famous statement at a Tory party conference about intervening before breakfast, lunch, tea and dinner. He will put on a great deal of weight if he has four meals a day. He is not intervening, but manufacturing is being reduced to a skeleton while he is having his four meals a day. The Government have utterly failed British manufacturing and, by so doing, they have utterly failed the nation.

Mr. Charles Hendry: I welcome my hon. Friend the Minister to the Department of Trade and Industry in which we both worked some time ago. At that time, he had a fairly minor role and I had an exceedingly minor role as an official under the noble Lord Young. I am delighted to see how well all those who worked in that Department at that time have progressed since. The only exception is Francis Maude and it is a great shame that he is no longer in the House. However, he will be with us again before long and we look forward to that. Our other colleague there at that time was Alan Clark. I am not sure what he is doing now, but my hon. Friend the Member for Plymouth, Sutton (Mr. Streeter) is an able successor.
There was a sharp contrast between what the Minister said and the speech by the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins). My father used to tell me that those who can, do; those who cannot, teach; and those who cannot teach go into politics. My hon. Friend the Minister played an important role in mining and the hon. Member for Newcastle upon Tyne, Central was a researcher and lecturer. That is a noble profession, and the fact that the hon. Gentleman followed it explains why Conservative Members will go on doing, while Opposition Members will continue to play politics.
The most breathtaking part of the speech by the hon. Member for Newcastle upon Tyne, Central was the pretence that the firms that invested here during the 1980s

would have done so under the last Labour Government and that their decision to come here did not owe anything to the Government's reform, especially our reforms of trade union legislation. Some 41 per cent. of Japanese investment and 30 per cent. of American investment in the European. Community is in Britain. In a survey conducted by the German chamber of commerce, 82 per cent. of German companies here said that they would like to expand their investment in Britain. That shows the success of the Government's record.
During the miserable period of Labour government, car companies were not investing here; they were pulling out because they saw Britain as a country in endless decline with bad productivity and out-of-date working practices which were strike-bound and ineffective and all too often produced second-rate products that did not work. Worst of all, they saw a Government with a terminal desire to interfere in the operations of business and the marketplace.
Britain has moved a long way since then and my constituency is an example of this country's good fortune in having a mixed industrial and commercial base. It also demonstrates how our manufacturing base has survived the recession relatively intact. Some of our companies, such as Ferodo, Street Cranes, Otler Controls and British Aerospace, which is just outside my constituency at Woodford, are world leaders. Their clear message is that recovery is happening. At 7·1 per cent., unemployment in my constituency is high, but even that puts us in the lowest 100 constituencies. Because we have a mixed industrial base and have not suffered in the decline of the manufacturing giants, we have been able to sustain that base. We are all grateful for that.
The past three years have not been just a local success story; they have been a national success story. Even in the teeth of a recession, our share of world manufacturing trade has started to rise. That has built on our growth period during the 1980s when Britain was the fastest growing country in the European Community, It is absolutely clear that we must live, work and survive in an international arena. Germany, Japan, Italy, France, Belgium, Greece, Holland, Spain, Portugal and Austria are all competitors of Britain, but they all have a problem that we do not have—this year their gross domestic products will decline while ours will grow.
Last year, thanks to the Konrad Adenauer Foundation, a number of hon. Members visited the Mercedes factory near Stuttgart. We were told that it wanted to lay off up to 25,000 of the 40,000 people whom it employed. So great is the recession in German industry that such steps have to be taken. There could not be a more stark contrast between that and the growth in our car industry. Last month, United Kingdom car registrations were up by almost 12 per cent. on a year ago; car production in April was 14 per cent. up.
Last week, Toyota opened its plant only a few miles from my constituency. It already employs 1,300 people and, when it is working at full capacity, it will employ more than 3,000. It is the largest-ever investment in this country, without Government support, totalling some £700 million. Seventy per cent. of the plant's products will be for export. In time, that will make a £400 million difference to our trade balance.
The improvement in the car industry has been happening for some time. It declined relentlessly from 1971 to 1981. The House needs no reminding that five of


those 10 years were the halcyon days of the Labour Government, when car production declined every year. Since 1981, almost without exception, but with a small drop at the end of the 1980s, car production has risen under the Conservative Government. By the end of the century, it will be at record levels.
The key issue, which was touched upon by my hon. Friend the Member for Sutton, is that of quality. People can now drive around with a Rover badge on their car —it is a sign of pride, not a warning against buying the car. Rover feels sufficiently confident that it is offering a money-back guarantee even to anyone who is dissatisfied with the colour of the upholstery. If it had offered that guarantee a few years ago, it would not have been just the M25 that looked like a parking lot; the M1 and the M6 would have been jammed with Montegos, Austin Princesses and Allegros being taken back to the factory by people wanting their money back. Such is the current reputation of Rover that it can now offer a money-back guarantee.
I am proud to get into my British-designed, British-build Land-Rover Discovery. Every time that I drive it I am aware that a British company is taking on the world and winning. There is a convention among politicians that when we are abroad we do not run down our country. It is sad that all too many Opposition Members, when they are at home, are relentlessly prepared to do so.
Rover showed us what happens when a nationalised industry is returned to the private sector. There is a similar story with other companies, such as British Aerospace at Woodford. Last year, the regional jets that it manufactures captured just over 50 per cent. of the world market in very difficult circumstances. Now, through a joint venture with Taiwan Aerospace, that success will be further built upon and British Aerospace's position will be strengthened. That joint venture would not be possible without the active support and intervention of Ministers at the Department of Trade and Industry—active intervention before any meal that Labour Members might care to mention.
The same is true of other privatised industries, such as British Steel, British Telecom and British Aerospace. British Airways has doubled the number of passengers that it had when it was privatised. Almost all those companies offer a better service to their customers at a lower price. Each and every one of those privatisations was relentlessly opposed, tooth and claw, by Labour. We need no lessons from Labour on how to bring those companies back into profitability and make them successful again.
A few weeks ago, the Financial Times wrote of the Labour party
Labour's corporatist interventionist instincts are alive and putting the boot into the free market. Those who throught that Labour had forsaken the profits are dirty, bash big business mentality of the post-war decades are in for a rude awakening.
Almost a year earlier to the day, the same Financial Times urged its readers to vote Labour, but now it realises that Labour does not change its spots. It is not an electable party and never will be.
Perhaps we should look more than anything at the example of British Coal, because of the topicality of the coal industry to the debate and to the House. Output per man in British pits more than doubled in the eight years

since 1984. The tragedy of British Coal—I speak as one who has contested two mining seats and who has a tremendous affection for the industry and for the people who work in it—is that if productivity had increased as fast in the 1960s and 1970s, its work force would have been sustained and the difficulties that British Coal now faces would not exist.
Since 1979, the Government have supported British Coal to the tune of £18 billion of taxpayers' money, and the subsidy that the Government are continuing to give will ensure that British Coal continues to have a chance to compete. The hon. Member for Newcastle upon Tyne, Central referred to Komatsu in his constituency. It seems all right for a failing British company to be taken over by a Japanese company—so why does Labour not welcome the decision by the Government and British Coal to encourage private sector companies to take over those British pits that do not have a future in the nationalised sector? The sooner that British Coal in its entirety can be returned to the private sector, the better it will be for all.
I come with the message from High Peak that manufacturing industry is not just improving but is in optimistic mood, and is looking forward with determination and in the belief that it can break through the end of the recession. Government policies are working. Industry itself will testify to that, and I urge the Government to continue on their present course.

Mr. McLoughlin: With permission, I wish to congratulate those of my hon. Friends who participated in the debate.

Mr. Beith: And others?

Mr. McLoughlin: The right hon. Gentleman should be a little patient and not get excited, because I was about to say that other right hon. and hon. Members participated in a debate which—I say this with due deference to the hon. Member for Linlithgow (Mr. Dalyell)—was more wide ranging than I expected, but I will reply to the points that were put to me.
We have slowly dragged out from Labour Members their agreement that there has been a dramatic improvement in manufacturing since 1979. The hon. Member for Newham, North-West (Mr. Banks) said that we do nothing but attack trade unions as the cornerstone of all our ills. I would not go that far, but trade unions must take a big responsibility for the low growth that Britain suffered in the 1970s. In 1979, we lost 25 million working days through strike action, and that did British industry no good whatsoever.
If the hon. Member for Newham, North-West claims that there is nothing wrong with the trade union movement, he is deluding himself and the Labour party, which no longer talks of reversing the trade union legislation that we fought Labour tooth and claw to get through the House.
The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) made some good points about research and development with which I agreed. He quoted my right hon. Friend the President of the Board of Trade, but my right hon. Friend was merely pointing out what still needs to be done. I am not here today to say that everything is fine and nothing more needs to be done. Indeed, many of
my hon. Friends referred to areas in which more needs to be done, including education. Developments in education are wholly important.
The research and development scoreboard shows a welcome increase in spending by companies. In the difficult climate of the past 12 months, spending has risen by 6 per cent.—above the inflation rate—to £6·5 billion, so some changes and welcome increases have been made in research and development. Obviously, I should like to see more of that.
My hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) explained the changes that have taken place in the motor industry, especially at Vauxhall cars. He was right to say that Vauxhall has the same production levels and requirement levels as Toyota and Nissan and is competing with those companies. Those companies have had to reduce their labour force to compete. The hon. Member for Newcastle upon Tyne, Central must accept that Nissan and Toyata are competing with a smaller number of workers than would have been required some years ago. If the British car industry had not made the same changes as Vauxhall and Rover, it would not be competitive today or producing cars. One way for the industry to become more productive was to reduce its work force. The simple answer is that unless companies sell their goods, there is no market and it is no good producing goods that no one wishes to buy.
Wide points were about the whole system of education, the way in which the GCSE was introduced and its importance in changing our education system. I agree with that. It must be admitted that, when the reform was introduced in 1986, there was tooth and nail opposition from various teaching unions. The new exam system got under way only at the insistence of the then Secretary of State, Lord Joseph, in the face of opposition, and was then widely welcomed by the teaching staff. Perhaps that also holds a lesson for us about what needs to be done in the future.
Several of my hon. Friends and the right hon. Member for Berwick-upon-Tweed (Mr. Beith) referred to the importance of the training and enterprise councils. I came to my new responsibilities from the Department of Employment, where I worked closely with those councils and saw the role that they had to take on. A number of TECs have taken forward some imaginative ideas and will have a substantial role in developing local enterprise and training. They were instrumental in the constituency of my hon. Friend the Member for Somerton and Frome (Mr. Robinson). The right hon. Member for Berwick-upon-Tweed tried quickly to link in what his county council was doing.
The hon. Member for Tooting (Mr. Cox) talked about the need for the assisted area map to be reviewed. That is being done and announcements will be made when final decisions are taken. I was sorry to hear the hon. Gentleman talk about social dumping. In some ways, he was saying that the inward investment that we have attracted is social dumping. If he thinks that, he should look at those companies because they have high-quality, good and proper jobs.

Mr. Cox: rose—

Mr. McLoughlin: I am sorry, but I am short of time. I apologise if I have misinterpreted the hon. Gentleman, but that seemed to be the direction in which he was aiming his remarks.
My hon. Friend the Member for Canterbury (Mr. Brazier), in a developed speech, had some fairly radical ideas. That should not surprise us because he often has radical ideas and, sooner or later, some of them are pursued. I shall certainly reread his speech with interest.
I was slightly surprised by one of the points made by the hon. Member for Linlithgow. He referred to the reports that he has made and the people to whom he has spoken since his return. He said that people are amazed that we are still applying sanctions, that in November 1945 the Marshall plan had already been implemented, so why has there been no change? The hon. Gentleman seems to have overlooked the obvious fact that in November 1945 Hitler was no longer around in Germany.
The hon. Member for Linlithgow knows the view of the United Nations on Libya: sanctions are targeted at military equipment and goods relating to civil aviation and are in pursuit of a mandatory resolution that stems from the alleged complicity of the agents of the Libyan Government in the destruction of the PanAm aircraft over Lockerbie. The hon. Gentleman was right to condemn that horrendous crime. At that time, I was a Minister with responsibility for aviation and saw the consequences of the destruction of that aircraft.
As for the sanctions on Iraq, United Nations Security Council resolution 687 permits, under licence, the supply of foodstuffs, medical products and materials and commodities deemed as being essential for civilian use. Any United Kingdom exporter can apply to my Department's sanctions unit for an export licence and for a United Nations letter of clearance, confirming the United Nations sanctions committee's approval of the export of medical products to Iraq. I shall look at the hon. Gentleman's speech and give a considered response to the questions that he put to me. I will ensure that he receives a full reply, either from me or from my hon. Friend the Minister for Trade.

Mr. Dalyell: I asked for a considered response, but I should like to keep open the option that the Prime Minister has kindly given me of going OD see him.

Mr. McLoughlin: If the hon. Gentleman feels it is appropriate, I am sure that he will wish to follow up that invitation.
Like my hon. Friend the Member for Somerton and Frome, I have a large rural constituency. I realise, therefore, that large constituencies are very diverse and that industry is vital to individual towns in such areas. If industry leaves those areas, it can have a devastating effect on employment. Nevertheless, I was pleased to hear my hon. Friend say that he has witnessed an increase in industrial activity in his constituency.
The right hon. Member for Berwick-upon-Tweed referred to relocation expenses. I am sure that he will deal with that question during the proceedings on the Finance Bill. I shall not comment, therefore, on matters that will be debated upstairs in due course.
My hon. Friend the Member for Plymouth, Sutton (Mr. Streeter) made a strong case for Devonport naval dockyard. He knows better than most that no decision has yet been taken. An announcement will be made in due


course. I can say no more than that now. Both he and many hon. Members with constituencies in that part of the country have made a strong case, both this morning and on other occasions, for the dockyard. I will ensure that what my hon. Friend said is drawn to the attention of my right hon. and learned Friend the Secretary of State for Defence.
The hon. Member for Newham, North-West said that the Government have adopted a short-term outlook. We have not. I have outlined today the changes in manufacturing productivity over the past 10 years. It has taken time to put into operation some of the measures that we wanted to take, because of the tooth and nail opposition to all the trade union and privatisation reforms that we believe are essential if the economy is to grow and develop. The business activity of many industries was restricted by their being in the public sector, so we have given those industries the freedom of the private sector to make commercial decisions and attract business from elsewhere in the world.
There have been tremendous achievements. Before they were privatised, British Telecom, British Gas and the water companies had to restrict their operations to the public sector. Since privatisation, they have had the freedom to become leaders in world markets, and they have succeeded. I do not, therefore, accept the accusation that we have adopted a short-term attitude.
My hon. Friend the Member for High Peak (Mr. Hendry), who shares a constituency boundary with me, made a number of important points.
Interestingly, when the hon. Member for Newcastle upon Tyne, Central was asked why, if so much is so awful, we had managed to be successful in attracting so much inward investment, there was a numbing silence. He could not bring himself to acknowledge that, in the past 10 years, the Government have put in place the right economic conditions, the right economic climate and the right industrial relations framework to attrack inward investment and to see a growth in jobs—

Mr. Cousins: A growth in jobs?

Mr. McLoughlin: A growth in the amount of jobs available that would not have been available if we had not been as successful in attracting inward investment.

It being half-past Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Tax Offices (Closure)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Andrew Mitchell.]

Sir Roger Moate: I am grateful to my hon. Friend the Financial Secretary for being here personally on, no doubt, an inconvenient Friday afternoon to respond to this debate on the proposed closure of local tax offices.
If the debate had been held at a more convenient time in the parliamentary week, it would have been supported by the hon. Member for Birmingham, Hodge Hill (Mr. Davis), who is an adviser to the Inland Revenue Staff Federation. May I say how supportive he has been and that he would have been here were it not for prior commitments?
I have been impressed by the case put, and the manner in which it has been put, by members of the staff federation. They must be, and are, concerned about the disruption to the lives of their colleagues, but their arguments have related principally and genuinely to the question of providing a service to local taxpayers. Despite the likelihood of the closures going ahead, their concern, and mine, is that this should not happen unless we can retain a proper Inland Revenue presence, even a small but proper one, to provide good customer service to local taxpayers.
I have long been impressed by the commitment of the Inland Revenue to service to the taxpayer under the taxpayers charter. Even before the citizens charter entered our political life, I recall visiting Somerset house to be greeted by a large and splendid board proclaiming the taxpayers charter. Like the Ten Commandents, it was there, proud and dominant. There was and is a genuine commitment to the charter, and I understand that it is displayed in every tax office.
If it were not a Friday afternoon, we might have been graced by the presence of the Home Secretary, who once had an Adjournment debate on the closure of Folkestone tax office. Perhaps Mr. Matthew Parris would have been in the Press Gallery, because when he was a Member of Parliament he took the same course fora tax office in his Derbyshire constituency. Those were the last two Adjournment debates on the subject.
It is proposed that the Sittingbourne tax office should close this August. It is not the conventional wisdom that the Inland Revenue is held in love and esteem by its customers, but the proposal has created a great deal of local opposition and concern. I shall later give the Minister a petition that was gathered in the space of a few hours in Sittingbourne. It has been signed by more than 700 taxpayers who oppose the closure. I must warn him that the second signature on the petition is that of a Mr. Major, who may have friends in high places. Local companies, business interests and professional accountants have also objected to the proposal. I, too, oppose the closure most strongly.
I hope that, over the years, I have not troubled the local tax office too often, but when I have done so I have always received a most courteous and helpful response. The office has been of great assistance both to me and to my constituents. I shall be very sorry if that valuable link is lost.
Time after time, local offices have been withdrawn in many spheres of government, the public services or public utilities. It seems that there is a relentless drive towards centralisation which, we are told, will save money, use resources more efficiently or improve services to the customer. However, the opposite almost always happens: centralisation costs more, wastes resources and reduces the level of customer services. In any event, it certainly reduces the quality of face-to-face service.
We are often told that such changes are the inevitable consequence of the computer age and the revolution in information technology, but the reverse should be the case. Just as the computer terminal allows professional skills to be employed even at home, the computer link should encourage rather than undermine the provision of local services in local offices, offering face-to-face help to the consumer, backed up by direct and instant access to all necessary information.
I am not convinced that it will be cheaper or better to close local tax offices and centralise their services in a few, very large offices. Taxation officers and Revenue staff will need the same phones, desks, offices and computer terminals. It is not immediately clear where the substantial economies of scale are to be made, but it is clear that there will be greater travel costs for everyone—public and staff alike—and that local services to the customer will be lost.
My immediate concern relates to the proposed closure of the Sittingbourne office. It is a large office employing 80 or 90 staff who dealt with no fewer than 1,100 personal inquirers in the past 12 months. That was in addition to telephone inquiries and inquiries from visitors who wanted literature or those who attended for formal interviews. Let there be no doubt about the importance of the office in terms of local service or about the inconvenience that the closure will cause.
It is proposed to relocate the office in Maidstone. The journey to Maidstone by public transport is so long that it will deter most people. It is bad enough getting from Sheppey or other parts of my constituency to Sittingbourne, but the round trip of about 50 miles from Sheppey to Maidstone is unthinkable. One would have to allow a couple of hours for a return journey even from Sittingbourne to Maidstone or about three hours from Faversham or Sheppey to Maidstone. One must also take into account the inconvenience, the time lost and the cost of transport. The Minister and the Inland Revenue must understand that, in practice, people will not make such long journeys. Indeed, they cannot make such journeys, so customer services will be lost.
I shall concentrate on a number of issues that arise from the Sittingbourne closure but which apply equally to the question of Inland Revenue reorganisation. I do not think that most people—or, indeed, most hon. Members—are aware that we are on the threshold of an enormous reorganisation of the Inland Revenue network of local tax collection offices. I am told that there are 766 local offices, the majority of which will cease to exist in the next decade. There has been very little debate and very little justification for this immense exercise. I have suggested that the Treasury Select Committee should look into it, but I do not know whether it will. I hope that it will, because it is important that it should.
Let me put it on record that it is possible—probable, I suspect—that the Inland Revenue could make a powerful and first-class case for the process, but, equally, it is right that the process should be scrutinised, challenged and

justified. I suspect that, after proper analysis, the case might prove not to be so strong, but it should at the very least be scrutinised. If it is not scrutinised properly by the House, we may be inundated with hundreds of similar Adjournment debates on Friday afternoons. If that is not a deterrent, I do not know what is.
I recently asked the Minister questions—through parliamentary questions and in correspondence—to which he gave frank and helpful answers. I asked whether there had been proper consultation with everyone involved. I wanted to know about the projected savings and how the Minister intended to continue to provide good customer services locally in order to meet the criteria of the citizens charter.
My hon. Friend gave some full and courteous answers. I do not intend to be abrasive—I hope that I never am —in saying that the answers simply serve to increase my scepticism about the whole exercise. I hope that my hon. Friend does not think that I am being too dismissive of the information he gave me. In effect, the savings are minuscule, if they exist at all. My hon. Friend has given me more information in a letter I received today which bears that out. In some areas there may be some savings, but in other areas there may not be. New central costs are incurred in terms of computer services and the like. It is clear that an immediate and substantial saving is not the objective of the exercise; even if it is, it will not occur.
I asked my hon. Friend about consultation, and he said that a number of representations had been received. However, I had the impression that, although the representations might have been courteously received, the programme was under way and virtually unstoppable, and that consultation was not really part of the exercise. I refer to public rather than to internal consultation. I leave it to others to decide whether that has been proper. I gather that there may be some complaints in that respect, but my objective today is not to deal with those.
The answers on the citizens charter implications were not satisfactory. My hon. Friend said:
the Department is investigating alternative ways of meeting taxpayers' needs."—[Official Report, 10 May 1993; Vol. 224, c. 326.]
It is not satisfactory to be told that alternative ways of providing help are being investigated when it is proposed that closure should take place this August.
I do not intend to dwell on the question of cost, but I point out that I was told that the total saving from the reorganisation in our area would be £1.25 million. That figure is rather dubious. Even the rental savings in Sittingbourne are likely to be only £79,000, which is such a small amount that it is likely to be absorbed by the margin of error. The £1.25 million saving arises from the substantial reorganisation of many offices.
It points to the scale of the exercise that, by March 1994, as my hon. Friend has told me, 15 reorganisations involving 71 existing offices will have taken place. Of those, 61 offices will cease to exist in their present form. It is that larger reorganisation which saves the relatively small amount of £1.25 million. I wonder whether that allows for the number of local offices that will be vacated and left empty, such as the excellent Revenue office in Sittingbourne? Taking all that into account, are we saving anything at all? So often in such reorganisations the costs go up. Reorganisation costs money.
I return to the key issue of' meeting taxpayers' needs, on which I believe my hon. Friend can and should do


something. He should make it clear to the Revenue that providing proper tax advice offices in every significant town where offices exist today is a condition which must be met before reorganisation proceeds any further, either in my constituency or anywhere else in the land.
As a Treasury Minister, my hon. Friend is a perceptive and fair man. I never used to say that when he was a Whip, but I hope now that he will acknowledge that his answers have fudged the issue. They do not deal properly with the provision of a future service for taxpayers. I do not blame my hon. Friend the Minister or the Inland Revenue officials for doing their best with the reorganisation. They are working to their brief and doing their best, but such schemes develop a life and momentum of their own and sometimes need correcting. What should be provided to replace tax offices if and when they are closed? The answer I first received from my hon. Friend was:
The Department is investigating alternative ways of meeting taxpayers' needs.
The closure is to take place in August, so it is a bit late to be investigating it. That is fundamental.
I then gathered that there might be a proper tax advice office locally. I take that to mean a small office—in Sittingbourne or anywhere else that is appropriate—manned by a small professionally qualified team of staff who can deal with most inquiries and help taxpayers, with direct access to computer records and enabling taxpayers to make appointments for interviews with inspectors on agreed dates. All such Revenue staff could be fully engaged all the time, doing normal tax work as well as providing a face-to-face customer service. But is that on offer? I think not.
I am told that such an office might be created at Maidstone or at other new large tax offices when they are established to replace the existing 766 offices. It is of little use to my constituents if the office is at Maidstone and in an inaccessible location.
My hon. Friend the Minister tells me in his letter today that there will be an improved telephone service. That is very good, but it is not what most people mean by a face-to-face personal service. Remember: there are 11,000 personal callers at our local tax office. A telephone service is not enough; it is not what people consider to be local service in accordance with the taxpayers charter.
We are then told about a mobile advisory service—a tax man in a tax van. Like the mobile library service, that may be good for villages, but most people will not consider it an adequate alternative to a regular, permanent, proper service in substantial towns and communities throughout the country. We are also told about tax clinics. I cannot really distinguish between the tax clinic and a mobile tax service. Neither sounds very substantial or permanent.
The solution to the problem is clear and would be easy to implement if my hon. Friend would take it on board. My suggestion is constructive rather than obstructive. It is simply that we should ensure that there are properly manned genuine tax advice or tax assistance offices in towns throughout the country.
The Government and the Inland Revenue should take a much harder look at the reorganisation scheme and should pause before closing any offices and, in particular, the Sittingbourne office. I have neither read nor heard anything to persuade me that the exercise will be anything other than more costly, more bureaucratic and more

inconvenient for staff and public alike. In its present form and without improvement, it runs contrary to the whole spirit of the citizens charter and the taxpayers charter, to which I know and believe the Inland Revenue is truly dedicated.

The Financial Secretary to the Treasury (Mr. Stephen Dorrell): I thank my hon. Friend for what he said about the commitment of everyone who works for the Revenue to the principle of quality of service. I am sure that he is right in what he said. The Inland Revenue is not always presented in a favourable light and when an opportunity to recognise the importance of its work arises, it should be taken. I thank my hon. Friend for doing that and wish to associate myself with his remarks on that subject.
My hon. Friend fairly sought to present his argument in the context both of the specific circumstances affecting Sittingbourne and of the general programme of office reorganisation on which the Revenue is embarked. Let me try to respond to his arguments in very much the same spirit. I shall start with the general and work towards the specific, using Sittingbourne to illustrate some of the general points. I should say in parenthesis to my hon. Friend that I share his natural suspicion of many of the arguments advanced in favour of improving efficiency and value for money by centralisation. That is a prejudice which I share with him absolutely.
I also share some of my hon. Friend's discomfort about the application of the principles of change within the Inland Revenue in the local office context. One of the things that my hon. Friend and I have in common—apart from the fact that I was once his Whip—is that the local tax office that serves Loughborough is also tied up in a programme of change similar to that which affects his constituents in Faversham. Therefore, I share his prejudice and his local constituency interest in the issue.
I want to refer to the programme of reform which my hon. Friend described and which, he rightly said, would merit more debate. One of the frustrating things about being a Minister is that one can commit a fair amount of time and effort to working out a policy programme and one can announce it, but if it does not capture the imagination, securing a debate on the issue is very much easier said than done. I would not run away from a debate on the programme and I agree with what my hon. Friend said about the merits of having a better understanding in the House and outside about what the Revenue is seeking to do.
I believe that the arguments in favour of the programme of change which was announced to the House—it was not kept secret—as a 10-year programme by the previous Chancellor of the Exchequer, are very powerful. The programme was announced just before the last election, so clearly we did not believe that it was something which needed to be shuffled under the carpet.
To understand those arguments, perhaps it is best to start by understanding the present situation and the disadvantages in the present structure of tax offices, which should be balanced against some of the advantages to which my hon. Friend referred.
It is quite right to say that, under the present system, we have an extensive office structure which is represented in most significant towns and cities all over the country. That much is true. However, it is also important to remember


that that office structure has weaknesses, one of which is that we still have in our tax system a distinction which no one, starting with a clean sheet of paper, would wish to defend as a principle that we would want to reinvent. That is the distinction between the inspector of taxes and the collector of taxes.
One of the most frustrating things about dealing with the tax system as it is presently structured is to be told by the inspector or collector—whoever it is one wishes to speak to—that he does not deal with the issue that one wants to talk to him about and that it is the responsibility of his colleague—the collector or inspector—on the other side of the fence. The distinction between inspector and collector is not something that I regard as a strength of our system.
Another disadvantage in our system is that although there is a local tax office in each significant town and city, it does not mean that a resident of that town will have his tax affairs handled in that office. The vast majority of residents have their tax affairs dealt with through the schedule E system of PAYE. The PAYE base is not in the tax office where the resident lives, it is in the tax office of the payment point of the employing company. With regard to large national companies, it can take some time to find the right tax office to inquire about one's affairs. One does not deal with one's local tax office as the tax office is determined by the employer's payment point.
Another disadvantage of our present system is that even if one ultimately finds the PAYE office that deals with one's PAYE affairs, if one has more complex tax affairs it is likely that that office will not deal with other aspects of one's circumstances. Individuals might find themselves dealing with more than one tax office in relation to different aspects of their private affairs.
All that is the result of our traditional system. Those are weaknesses of that system. That is why the Revenue has embarked on the process of change to try to address some of those weaknesses and at the same time—I do not apologise for this—to deliver significant cost savings.
What does the programme of change announced by the Chancellor in March 1992 do? First, it addresses directly the distinction between inspector and collector as it commits the Revenue to merge those two operations. Secondly, it seeks to establish the new office structure—the three-tier office structure—to which my hon. Friend referred and with which he is clearly familiar.
That structure will bring significant benefits. It will bring, first and foremost from the taxpayer's point of view, a new system which will ensure that there is, for each taxpayer, a single point of contact with the Inland Revenue for the first time. Whether one is dealing with a collection function or an inspection function, and whichever part of one's affairs—if they are complex—one is dealing with, there will be a single point of contact.
Dealing directly with my hon. Friend's point about the taxpayer assistance system, because it will be a more specific function within the Revenue, there will be a more direct commitment and a greater capacity to deliver a high-quality taxpayer assistance service than exists at the moment. I know that my hon. Friend doubts that, because he read my letter on the subject and he says that we have not yet committed ourselves in concrete to what precisely the structure of that service will look like in Sittingbourne.
My hon. Friend is on to a fair point, except that it seems that what is important in the context of taxpayer assistance is not the bricks and mortar, the nature of the

office and telephone and the qualifications of the person who will sit there, but that the taxpayer assistance service directly answers the specific concerns of the citizen, the taxpayer, whom it is there to serve.
I turn my hon. Friend's arguments back on him and stress to him the benefit of having a commitment to taxpayer assistance which is flexible and which we are determined should respond to the specific concerns that are expressed in my hon. Friend's constituency, for example. I am not sure whether my hon. Friend would think that the interests of taxpayers in Faversham are best served by having bricks and mortar in Sittingbourne or having a specific support provided more closely to them in Faversham. Those are questions which the Revenue management is quite correct to address to seek to deliver a better service.
I understand my hon. Friend's natural concern to see something that is firm and a commitment that can be readily understood. The commitment is not to a specific nature of service. The commitment, as the citizens charter enjoins it to be, is to deliver a quality of service in terms of taxpayer assistance.
The third benefit, which we should not sneeze at, is that the programme of change to which the Revenue is committed will deliver running-cost savings over a 10-year period which, at the end of that period, will amount to roughly £70 million a year in today's values. I accept my hon. Friend's point that we must tie that down and that matter has been the subject of more than one intense conversation between myself as the Minister responsible and the chairman of the Board of the Inland Revenue. I entirely agree with my hon. Friend that if we embark on a 10-year programme at the end of which we are promised Revenue savings of £70 million a year, it is part of the functions of Ministers on behalf of the taxpayer to insist that that saving is secured. And, furthermore, it is a part of Ministers' responsibilities to set out milestones along the way so that we do not suddenly get to a point in 10 years when we say that we were promised £70 million in savings and suddenly they are found not to be there.
There will be savings, there will be a single point of contact, and there will be a greater commitment to taxpayer assistance, because that is part of the purpose of the changes that we are undertaking.
On the specifics of the programme in Sittingbourne, as my hon. Friend will know, what is being done in Sittingbourne is not in a sense what was done in the tax office case of Matthew Parris or even, I suspect, of my right hon. and learned Friend the Home Secretary in Folkestone, to quote the two examples to which my hon. Friend referred. It is quite consciously part of the wider process of change which I have been describing. It brings together the functions of the Sittingbourne tax office, the existing two offices in Maidstone, and part of the collection activities in Chatham and Canterbury. It delivers significant short-term savings—never mind the contribution to the wider programme and the £70 million over 10 years that I have been talking about. The new Maidstone office will deliver the service to the area for which it is responsible for a figure which will cost the taxpayer in Revenue savings about £340,000 a year less than the existing tax office structure does.
Once again, I agree with my hon. Friend that we must make certain that those savings are real and secured, but £340,000 a year out of a local tax office does not seem to me to be an insignificant quantum of savings.
The justification of the change is two-fold in terms of the Sittingbourne office. The first is that it delivers cost savings in its own right as a scheme and the second is that it is part of a wider reorganisation of the Revenue which

is designed to improve the service to taxpayers and provide a better value-for-money service for taxpayers as part of the Inland Revenue's contribution to the citizens charter programme and improving the public service.

Question put and agreed to.

Adjourned accordingly at Three o'clock.